(FORTUNE Magazine) – Only 25 years ago, Homo sapiens conquered the moon. But now the proud splitter of the atom, inventor of the electronic computer, decipherer of the genetic code, and developer of the information highway may be humbled by a lowly denizen of the sewers and soils -- the microbe. Of the 160 antibiotics in use in the U.S. today, only one -- vancomycin -- stands shakily against uncontrolled ravages of Staphylococcus aureus, or golden staph, the most common cause of skin, wound, and blood infections. Staph infects nine million Americans each year, according to the Centers for Disease Control and Prevention (CDC). The overwhelming majority of people who get staph infections are treated with antibiotics. But now 40% of the infections respond to no other antibiotic but vancomycin. What happens when -- the question is no longer if -- vancomycin fails? Says a scientist: "A lot of people will die -- you can die of a boil if there's no way to treat it." That's just the scariest Andromeda Strain scenario. Suddenly, when humans thought they had vanquished bacterial infectious diseases, the bugs are back with a vengeance. "Almost all disease-causing bacteria are on the pathway to complete resistance," warns Robert B. Naso, vice president of research at Univax Biologics of Rockville, Maryland, one of a dozen small biotech companies trying to combat the resistance problem in novel ways. The prospect of biotech having to rush to the rescue of embattled Homo sapiens may sound a bit far-fetched, particularly considering that investors lost millions in the industry's biggest letdown to date: the failure of medications aimed at sepsis, a bacterial blood infection that kills 100,000 Americans a year. Three highly touted companies, Centocor, Xoma, and Synergen, were clinically testing novel biologically engineered compounds to thwart the disease. The approach failed, and the stocks were severely hurt. Will other researchers fare any better? Probably, says Cynthia Robbins-Roth, an immunologist who publishes the trade paper BioVenture View and often blasts biotech companies for hyping what they do. She says the search for new antibiotics is "biotech at its best -- understanding the underlying mechanisms of disease and trying very powerful new approaches. But it's going to take a real effort to succeed." Pray that it does. Hair-raising examples abound of microbes that are rapidly becoming resistant. Public health officials speak openly of a crisis in the making. A panel of experts convened by the National Academy of Sciences recently concluded that the U.S. public health system's capacity to deal with microbes is in jeopardy. Concerned about the resistance problem, the FDA has said it will speed promising antibiotics through the fast-track approval process originally devised for anti-AIDS drugs. Any doctor who encounters a bug he can't treat can get immediate permission to use an experimental drug by calling the FDA at 301-443-4320 in the daytime or 202-857-8400 after hours. What brought all this on? Massive use of antibiotics around the world has subjected microbes to Darwinian pressure of a severity the bugs have not faced since the last Ice Age, says Stanford University microbiologist Stanley Falkow. The first strains of staph that could withstand penicillin were spotted in a London hospital as early as 1946, just two years after wide introduction of the wonder drug. As time passed, dozens of bugs found ways to render harmless the most common antibiotics. For a long time, resistance seemed a fairly minor nuisance. Drug manufacturers felt confident that they could always pull new antibiotics out of their screening programs if necessary. The compounds came mainly from soil microorganisms such as molds, which produce antibiotics as they compete against microbes for living space and nutrients. By last year, U.S. drug companies had built antibiotics into a $6-billion-a- year business, accounting for roughly 10% of prescription-drug sales. But the larger, more lucrative markets for cancer and heart disease medications have diverted the drugmakers' attention: According to a survey by a scientific panel at the National Institutes of Health, by the mid-Eighties about half of U.S. drug companies had cut or abandoned research into new antibiotics. The major players that remain all have pursued the same strategy: economizing on R&D while trying to stay a step ahead of both corporate rivals and the bugs. They have limited their efforts largely to constant tinkering with existing antibiotics, a method reminiscent of Detroit automakers' bygone practice of merely redesigning cars' tail fins each year. "We were always modifying the same classes of antibiotics; a very large percentage were modifications of penicillin," says George Miller, an executive at the Schering Plough Research Institute. "We knew that resistance was lurking around the corner, but commercially it was very difficult to bring a new antibiotic into the marketplace, because the existing ones were already so good." The 160 antibiotics on the market today are variations on only 15 major compounds.

THE BUGS KEPT GAINING as science neglected to attack them in new ways. "It's very embarrassing for man to have microbes coming out on top," says Stanford's Falkow. But it's not surprising. Microbes, which have inhabited the earth much longer than people -- for billions of years -- are master survivors and much better chemists than humans. The creatures replicate as often as once every 20 minutes, a rate at which a single microbe can produce ten million to 20 million offspring in a day. As a result, resistant strains evolve with striking speed. What's more, scientists have found to their amazement that bacteria of different species often share new resistance mechanisms with one another, by exchanging tiny round genetic structures called plasmids or even smaller bits of DNA called transposons. A single plasmid can carry genes with frightening versatility: When a microbe gains the ability to defeat one antibiotic, it can often withstand six or seven others to which it has never been exposed. In hindsight, the species Homo sapiens has made so many mistakes in battling the bugs that it has made a homo sap of itself. For example, humans now face a toxic strain of a ubiquitous and usually benign bug, E. coli, that lives in the intestines of people and animals. The new strain evolved in beef cattle when the bacterium, threatened by constant exposure to antibiotics in the animals' feed, borrowed a toxin-producing resistance plasmid from the shigella bacterium, which causes dysentery. First detected in 1988, toxic E. coli last year killed four people and sickened hundreds of others who ate hamburgers at fast-food restaurants in four Western states. This summer, the bacterium has infected people in the Northeast. "We've created little monsters in what has become microbial warfare in reverse," says Naso of Univax. Antibiotic- resistant salmonella is another dangerous bastard of the wonder drugs. Many factors have combined to endanger the public. Doctors have overused antibiotics, often prescribing the drugs as a panacea for colds, sore throats, and other common ailments that sometimes aren't even bacterial in origin. Farmers, meanwhile, are pouring into livestock and poultry a quantity of antibiotics equal to that used for human health. In hospitals the risks are particularly grave. The appearance of AIDS, the increasing use of invasive surgery and organ transplants, the aging of the population so that more people need hospital care -- all have contributed to an upsurge of bacterial infections in hospitals. Many patients have impaired immune systems and provide fertile breeding grounds for drug-resistant bugs. ( About two million patients, or 5% of those hospitalized in the U. S. each year, get bacterial infections; up to 60% of those infections involve drug- resistant strains. In some intensive care units, the odds of acquiring a bacterial infection are as high as seven in ten. Societal changes play a role too. The explosion in the number of child care centers in the U.S., with an estimated 13 million children now in attendance, has created a broad new avenue for contagion. According to the American Society for Microbiology, kids in child care centers are 18 times more likely to contract bugs than kids who stay at home. CDC statistics show that the number of children who went to the doctor with middle-ear infections soared from ten million in 1975 to 24 million in 1990. A growing percentage of those children have resistant bugs, and the spread of such strains "is beginning to create a problem in office practice," according to Stephen L. Madey, a pediatric allergist in Baton Rouge. Hospi- talizing children with middle-ear infections that a few years ago could have been cured with a shot of penicillin is a vision nearing reality. Antibiotic-resistant microbes have struck hardest at the very young, the very old, and people with impaired immune systems. But even if no one in your family belongs to these groups, don't get the idea that you are in the clear. "Virtually everyone is at risk," says Rockefeller University microbiologist Alexander Tomasz. "Microbes respect no geographic or social borders."

INFECTION IS a ubiquitous threat because we live in an invisible sea of microbes. Each square centimeter of our skin, for instance, hosts a million or so bugs, including staph and strep. Bacteria can be transmitted by physical contact, such as a handshake. Every time you inhale or eat, you take in microbes that regard the body as "just one long, damp tube for potential invasion," in the words Thomas P. Monath, chief of research at biotech startup OraVax in Cambridge, Massachusetts. A healthy immune system usually copes with the bad bugs. But the system can falter when an injury, even a minor one like a scratch or insect bite, lets toxic bugs enter the bloodstream. That's apparently how some people succumb to Group A streptococcus, a vicious strain that kills by devouring tissue and releasing toxins into the blood. One victim, Gary Meadows of Ypsilanti, Michigan, was a healthy 33-year-old who scraped his knee when he fell off his bike in June. He died of Strep A four days after being admitted to a hospital. Muppeteer Jim Henson, another healthy man, succumbed to Strep A in 1990. He was 53. Where people congregate, microbes follow. A Wall Street analyst riding the subway to work has a greater than ever chance of contracting tuberculosis, which is caused by an airborne bacterium. A physician who has studied the spread of TB in New York, David Alland of the Albert Einstein College of Medicine, says the city's transmission rate matches that of many developing countries. Jet travel, meanwhile, helps spread the bugs, especially since the air in passenger cabins is unfiltered and circulates many times in the course of a flight. According to CDC, drug-resistant strains of TB bacteria have so far been detected in 36 U.S. states. To counter the rising threat, biotech small fry have mobilized far more quickly than the pharmaceutical giants. The counterattack against the bugs is developing on four major fronts.

-- Harnessing nature's own contact killers. Researchers have begun to extract a bonanza of antimicrobial substances from the tissues of moths, bees, cows, pigs, and even humans. Some of these new antibiotics work by punching holes in bacterial walls, causing the microbes to pop, like tanks hit by armor-piercing shells. This instant action is in sharp contrast to that of conventional antibiotics, which generally disable the bugs over the course of hours or days by inhibiting cell wall construction. Many of the new compounds act by combining physics and biology. A powerful electrical charge on their surfaces displaces ions in the bacterial cell wall, turning it into the bioequivalent of Swiss cheese; the microbe's innards spill out through the holes as it dies. In the forefront of this new field is Magainin Pharmaceuticals, a publicly held company in Plymouth Meeting, Pennsylvania. Magainin was formed to exploit a remarkable discovery in 1986 by molecular biologist Michael A. Zasloff, then at NIH. Zasloff had operated on African clawed frogs to remove their eggs, and afterward put the animals back in their murky holding tanks. He was startled to see the sutured wounds close quickly in the days that followed, with no infection and hardly any inflammation. This healing process was strikingly different from that of most animals, whose natural effort to ward off infection usually produces robust inflammation. Intrigued, Zasloff analyzed the frogs' skin. He discovered antibiotics that he named magainins, after the Hebrew word for shield. He has since found even more potent magainins in dogfish sharks, and he is now studying alligators. Says Zasloff: "Animals are hard-wired with these substances to protect them from being consumed by microbes." In the lab, magainins kill not only bacteria but also fungi, protozoa, and some cancer cells; Magainin researchers have successfully used the substances to treat infections in lab animals. But the first human trial had indifferent results. When magainins were administered to children with impetigo, a skin infection, the cure rate of 80% was equal to that of a nonmedicinal cream. Magainin's stock sank almost 60% on the news. The FDA is allowing the company to proceed with a more significant trial, against infected diabetic foot ulcers; if the drug proves useful, it could be on the market in about three years. Other bug-blasting antibiotics are on the way. Applied Microbiology of Brooklyn, New York, derives its drug, Ambisin N, from bacteria in milk. In lab tests, Ambisin has shown itself effective against H. pylori, a bacterium recently unmasked as the main culprit in peptic ulcers. Micrologix Biotech, a publicly held company in Vancouver, British Columbia, is concentrating on Enhancers, genetically engineered versions of microbe-busting peptides from bees and moths. The company's most promising compound is a potent killer of drug-resistant staph and other species of microbes.

-- Crippling the bugs by attacking their surfaces. After invading the body, microbes must attach themselves to cells in order to infect. Neose Pharmaceuticals of Horsham, Pennsylvania, aims to thwart that process by filling the bloodstream with fake copies of carbohydrate receptors found on the cells' surfaces. These decoy the bacteria into docking with them, thus handcuffing the microbes and rendering them harmless; before long the bugs are excreted from the body by normal physiological processes. Neose's drug is patterned after anti-adhesion compounds that occur in human mother's milk and help babies stave off ear infections and diarrhea. Says senior vice president and chief scientific officer Stephen Roth: "This is an antibiotic designed by the human body." The beauty of Neose's approach is that since the decoy compounds don't kill the bugs but simply render them inactive, no Darwinian pressure is brought to bear, and the microbes are far less apt to develop resistance. Neose will soon launch clinical trials of an aerosol spray ! to prevent pneumonia and an oral medication to block H. pylori in the stomach. Other targets beckon on the bugs' surfaces. Microcide Pharmaceuticals of Mountain View, California, is developing chemicals to keep bacteria from receiving the biochemical signals they depend on for orientation. Micrologix Biotech is investigating the use of penetrins, protein complexes that can carry antibiotic molecules through the walls of infected cells and hunt down bacteria that cause TB, food poisoning, and other afflictions. -- Torpedoing bacterial DNA. Scientists at Tufts University School of Medicine in Boston have discovered a cluster of five genes in bacterial DNA that serves as the bugs' alarm bell. When a microbe encounters an antibiotic, the cluster goes off, triggering as many as 40 additional genes that direct the synthesis of protective proteins. Lab director Stuart Levy and his associates are developing drugs to silence the alarm. Researchers expect more genetic targets to emerge as the deciphering of bacterial DNA accelerates. Human Genome Sciences of Rockville, Maryland, a publicly held leader in gene analysis, has begun to apply its automated sequencing equipment to decode genes upon which microbes depend at different stages of their lives. "It's like shining a light into darkness," says J. Craig Venter, president of the Institute for Genomic Research in Gaithersburg, Maryland, an affiliate of Human Genome Sciences. "By knowing all the genes and metabolic pathways, we can develop whole new ways of killing off these disease-causing bacteria. It's almost here now."

-- Devising brawnier vaccines. The use of vaccination against bacterial infections dates back to Pasteur, who discovered that microbes cause disease. Vaccines typically use harmless fragments of disease bugs to sensitize the immune system so that it recognizes and kills the real thing when an infection occurs. But while vaccines for children and the elderly are a standard part of modern medicine, the great success of antibiotics pushed antibacterial vaccine development out of the labs. Now the search is being revived. Univax Biologics has devised a clever, double-barreled approach against a strain of golden staph. Using genetic engineering, the company replicated a portion of the chemical capsule in which the staph camouflages itself from the immune system. Now in clinical trials, the resulting vaccine can be administered to people at risk, such as kidney dialysis patients, for long- term protection. By itself the vaccine has a limitation, however: It takes days to stimulate the production of antibodies, a delay that could prove fatal to patients such as auto accident victims who contract infections in hospitals. To help doctors protect such patients, Univax has been injecting healthy volunteers with its new vaccine, extracting antibodies from their blood, and bottling them in a preparation for use in trauma units. Apollon, a privately held startup in Malvern, Pennsylvania, is exploring another tactic in its effort to develop an anti-TB vaccine. The company's scientists want to co-opt the process microbes use to pass along resistance genes. Into harmless plasmids from ordinary E. coli, they insert a few genes from the TB bug. If all goes according to plan, the plasmids, injected into muscle or skin, should generate an immune response against TB. Apollon will soon test its approach on animals; clinical trials are at least two years away. Many other vaccines are under development. In New York, bacteriologist Vincent Fischetti and his colleagues at Rockefeller University are preparing to test a nasal spray against the strep that causes sore throats in 30 million Americans each year. OraVax in Cambridge is working on an oral vaccine to eliminate a serious side effect that many antibiotics create by suppressing normal bacteria in the digestive tract. This disruption of the natural balance allows Clostridium deficile, a relative of the tetanus bacterium, to proliferate, causing severe diarrhea and even colitis, which can be fatal. Says Thomas Monath of OraVax: "This is an emerging health problem of immense magnitude in the U.S. and elsewhere, causing havoc in hospitals and nursing homes."

If the vaccines and other new medications work, science will be able to prevent a return to the pre-antibiotic era, during which bacterial infections accounted for one-third of all deaths in the U.S. But that is about the best to be hoped for. Sobered scientists now know that the fight against microbes will be never ending, with the bugs gaining advantage in one round, humans in the next -- or so everyone hopes. Says Apollon CEO Vincent R. Zurawski Jr.: "It's too horrible to contemplate if the bugs win."