(FORTUNE Magazine) – If you want instant rapport with someone over 40, try mentioning that your memory is going downhill. About 70 million anxious baby-boomers will be eager to bond with you. You'll quickly come to see that those unnerving senior moments--the time the new CFO cornered you and you couldn't remember her name, the day you took 20 minutes to find your parked car, your recent blocking on the word "hammock"--are just part of middle age.

Bring up memory lapses with your doctor, and he or she will probably say that these minor midlife brain cramps are rarely a sign of imminent Alzheimer's. Instead, physicians describe non-elderly people with memory complaints as the "worried well." But that expression, while meant to be reassuring, has an implication that isn't comforting at all: "Well" simply means you're losing it at the usual rate.

Here's the hard truth: Average scores on memory tests decline steadily after age 25, says Thomas H. Crook, a former National Institutes of Health researcher who now runs Psychologix, a firm he founded to offer computerized cognitive assessment. Midlife memory erosion is unsurprising, given that by late middle age we're losing, on average, about 1% of our brain volume each year. We compensate, of course, with endless variations on tying a string around a finger. Falling back on habits and experience to reduce the need to absorb new information helps too.

But when it comes to total brainpower--the kind that's increasingly in demand in the info age--well, you may as well put on sneakers and try to literally outsprint the hungry young lions circling your job as to out-cogitate them. Tests that mimic practical memory tasks, such as associating names with new faces and remembering phone numbers after a short delay, suggest that by age 55 most of us are only about 75% as good at learning and recalling new things as we were at 25.

You'd think that by now every major drug company would have mounted a crash effort to develop the thinking person's Viagra--memory medicines that really work. Says Crook: "If a patient with presbyopia [the normal loss of close-up vision in middle age] complained to his physician, 'Doc, I'm having trouble reading the newspaper,' he wouldn't be told, 'That's what nature intended, so just go home and read less.'" But memory pills haven't happened, and the main reason is simple: Until last spring drugmakers didn't have a well-accepted diagnostic target to aim at.

Now that has changed. Spurred by progress in the fight against Alzheimer's, doctors have begun to embrace a kind of early-warning diagnostic category called mild cognitive impairment, or MCI--a state of fuzziness that falls between ordinary midlife memory loss and the devastating cognitive decline of Alzheimer's. When the Food and Drug Administration last spring effectively endorsed MCI as a diagnostic category, it opened a "totally new landscape for developing memory drugs," says Harry M. Tracy, publisher of NeuroInvestment, a Rye, N.H., newsletter.

At least a half-dozen fleet-footed startups plan to push potential medicines for MCI quickly into clinical trials. And while you shouldn't head for the pharmacy just yet--even if the trials pan out, new memory drugs are still several years from market--medical practice is on the verge of a society-altering change. At least some of the drugs for MCI are likely to ameliorate the milder memory deterioration almost all of us experience. The "normal" cognitive slide of middle age may well be transformed into a treatable abnormality--just as the blues were "medicalized" by the advent of Prozac.

The leaders include companies whose drugs have shown promise in animal and, in some cases, human studies. Cortex Pharmaceuticals in Irvine, Calif., plans late this year to launch an MCI trial with its CX516 drug, which appears to strengthen neuronal connections involved in recording memories. Memory Pharmaceuticals, a closely held Montvale, N.J., company, hopes to launch an MCI trial with one of its drugs by the end of 2002, says President Axel Unterbeck. And one of the most interesting startups, David Pharmaceuticals of Half Moon Bay, Calif., expects to begin an MCI trial this year with a compound discovered, but neglected, by the Swiss drug giant Novartis.

To understand why the memory-pill race is getting under way only now--instead of 15 years ago, when boomers started turning 40--it helps to know a little of the history of Alzheimer's. Details of its cognitive catastrophe were first described in 1906 by German neurologist Alois Alzheimer. But doctors didn't pay much attention to the disease for decades--infectious diseases, heart attacks, and other killers prevented most people from living long enough to get it, and those who did often were vaguely classed as senile rather than as suffering from a specific disease.

Alzheimer's and its dismaying implications finally came into focus in the 1970s. Today more than four million Americans have it, costing the U.S. an estimated $100 billion a year. As the huge baby-boom generation grows old, Alzheimer's could sink the economy--its incidence skyrockets after 65, and nearly half of seniors over 85 have it, according to some studies. Ironically, boomers' fixation on life-extending physical fitness may exacerbate the trend. In a moment of black humor, Cortex CEO Vince Simmon predicts, "Before long, we'll need fleets of vans that cruise around all day picking up elderly joggers and taking them home--they'll be in great shape but won't remember where they live."

By 1980, Alzheimer's research kicked into high gear. The first therapeutic fruits of this effort are on the market in the U.S. now: four drugs to treat Alzheimer's. They are not terribly effective--at best, they temporarily mitigate symptoms. Far more potent remedies now moving from the lab to the clinic may be able to keep many Alzheimer's patients out of nursing homes. But "the real payoffs will come when we're able to initiate treatment right at the earliest stage of the disease," says John Morris, an Alzheimer's expert at Washington University in St. Louis. "That's why there's so much interest in MCI."

What exactly is MCI? Some researchers believe almost all patients with MCI are headed down the steepening cognitive slope to Alzheimer's. Others aren't so sure. Marilyn Albert, who studies MCI at Boston's Massachusetts General Hospital, says only a handful of the 165 elderly patients she has tracked since 1992 have gone on to dementia, the terrible dreamlike confusion that sets in as Alzheimer's progresses.

To get an idea of how MCI affects daily life, I visited one of Albert's research subjects, a chipper 86-year-old retired pharmacist who lives with his wife in a trim split-level near Boston. For Frank, MCI is worrisome, inconvenient, frustrating, and embarrassing. But it's not debilitating like Alzheimer's. "Sometimes I can't think of the names of the guys I've been playing golf with for years," he says. "More than once, when I've left my house to do a couple of errands, I forget to do one of the two. I used to get in the car and head anyplace without thinking. Now I'm scared I'll get lost" on trips more than a few miles from home.

Growing interest in MCI is bringing even milder memory problems to the fore. In September the Institute for the Study of Aging in New York City sponsored a landmark meeting on age-associated memory impairment--the decline most people experience after 50. Attended by researchers and pharmaceutical executives, the meeting signaled a turning point: The worried well are finally on the medical establishment's radar screen.

The prospect of cognitive-enhancement drugs raises fascinating and disturbing issues. Once such pills become available, will middle-aged professionals who make life-or-death decisions--surgeons, pilots, top officials at intelligence agencies--be required to take them? Will performance standards go up in every line of work, leaving people who can't afford brain boosters in the dust? If we start taking memory pills, will we end up losing our true selves? Will we grow befuddled as endless trivia stick to our Velcro-like minds? Or obsessed with painful memories that won't fade?

Harvard psychologist Daniel L. Schacter explores such issues in a recent book, The Seven Sins of Memory. Most memory glitches, such as absentmindedness, are actually byproducts of desirable features of the mind, he argues. When we forget where we put the keys, for example, we're typically operating on automatic pilot, a supremely useful trick that frees up mental resources so that we can attend to important things. Schacter doesn't oppose trying to soup up our memories. He just shows what a tricky business it will be.

Still, we aren't novices at it. Most of us already take memory boosters every day--nicotine and caffeine, for instance, have both been shown to transiently improve performance on memory tests. A 1993 British study found that the more coffee subjects drank, up to about five cups a day, the higher their average scores on various tests of cognition, including on a memory quiz that involved recalling items from a list of foods. Elderly subjects benefited the most--those who drank four to six cups daily had scores roughly 8% higher than uncaffeinated peers. (Tea drinking, the Brits observed, also seemed to boost memory, though not as much as coffee.)

Sugar can give a brief memory boost too--the glucose that surges into the blood after eating sweets serves as both fuel for neurons and a key ingredient for making acetylcholine, a brain chemical that helps form memories. No wonder Proust got a kick from his madeleine and tea.

Given all this, you might wonder whether iffy "smart drugs" like ginkgo biloba can do even more for your remembrance of things past than a trip to Starbucks. The answer may well be no. Studies suggest that people with serious memory problems experience modest improvements after taking ginkgo, says Harvard's Schacter, but the effect is probably due to increased alertness much like that induced by a stiff cup of joe.

It probably won't ever be possible to develop a do-all memory pill. There are many kinds of memory, for one thing--the motor programs we use to tie shoes, the semantic memories underlying language, the high-level "explicit" memories we draw on to tell our life story, to name a few. Some kinds, such as the ability to remember faces and word meanings, deteriorate little over the years. Others, especially the memory systems we use to assimilate new things, seem distressingly age-sensitive. A reason may be that the brain's processing speed declines with age. The slowing likely impairs "working memory," a crucial mental scratchpad that organizes new information before selected parts are stored.

What's more, pulling levers in the black box of the brain is a very risky business--the list of known memory enhancers includes not only addictive drugs like nicotine but also deadly ones like strychnine. That helps explain why big drug companies have shied from cognitive enhancement. And why the key research in the area has been carried out by upstarts and mavericks. Among them are the pioneers who now have MCI drugs ready for trial.

Since the 1980s a distinguished team at the Russian Academy of Medical Sciences in Moscow has pursued increasingly potent drugs related to piracetam, a medicine widely used outside the U.S. as a cognitive enhancer. Another visionary is neuroscientist Cesare Mondadori, who led a team at Ciba-Geigy, now part of Novartis, that discovered two of the most interesting cognitive boosters on the horizon.

Perhaps the most remarkable member of the damn-the-torpedoes set is Glenn "Buddy" Diamond, an entrepreneur who set out six years ago to mitigate his son's Down syndrome. That congenital disorder causes not only retardation but also progressive brain damage much like that of Alzheimer's. Starting with zero funding and no drug industry experience, Diamond managed to light a fire under the development of both the Russian and the Novartis drugs, enlist some of biotech's leading lights to back his cause, and inspire the formation of David Pharmaceuticals--the startup is named after his 9-year-old son.

Known to associates as a brilliant, uncompromising polymath, Diamond was a Minneapolis consultant on business turnarounds when David was born. He soon became a self-taught expert on Down syndrome. But his growing knowledge led to frustration--no effective treatments exist for the disorder. To Diamond, this seemed a totally unacceptable institutional failure. "The conservative element always prevails in group settings" like large drug companies, he says, "and risks need to be taken in areas like this."

In 1996 he quit consulting to devote himself to what he calls pharmaco-archeology, the search for promising experimental drugs languishing on academic and corporate shelves. He sought out a retired Merck research manager as a mentor and began dreaming of forming a drug company around his finds. His quest began with piracetam, which has been tried as a remedy for everything from Down syndrome to vertigo. Developed three decades ago in Belgium, the drug (pronounced per-ASS-a-tam) has shown some ability in improving memory and other cognitive functions in animal and human studies. But its benefits have proved too limited to yield galvanizing data.

Diamond reasoned that chemical variants of piracetam might be more potent. Working at home, he pored over the huge medical literature on the drug. In 1996 he spotted a reference to the Russian work in an obscure journal. As David sat on his lap, he typed an e-mail inquiry about the work to one of the authors in Moscow, Rita Ostrovskaya. Her reply sent father and son racing to the local patent library one snowy afternoon.

Ostrovskaya, known for landmark studies in the 1970s on the workings of tranquilizers like Valium, had turned to cognitive enhancement in the 1980s. She and colleagues created a series of piracetam-like compounds. By the early 1990s they had discovered versions that appeared to be 1,000 times more potent than piracetam in animal and test-tube studies. One version, GVS-111, showed special promise: It protected brain cells from toxins and improved cognition in animal tests.

Wondering how they might attract commercial interest in the West, the Russians in 1995 obtained a U.S. patent covering their work. When the effervescent entrepreneur from Minneapolis contacted them out of the blue a few months later, says Ostrovskaya, "It was like God was helping us."

For Diamond, who knew he needed intellectual property to raise money, the Russian patent was electrifying news. In 1997 he arranged for Ostrovskaya and her colleague Sergei Seredenin to visit potential investors in Minneapolis. But the millions of dollars needed to develop GVS-111 failed to materialize when, Diamond says, "key investors lost their nerve." In 1998 he concluded that the Midwest wasn't the right place to start a brain-science revolution and took his one-man show to Silicon Valley.

One of his first stops was the biotech powerhouse Genentech, whose co-founder, the late Robert Swanson, had been impressed by Diamond's gumption when the two met in 1996. Swanson's connections led Diamond to David Pharma's future chairman, John Patton, chief scientist at Inhale Therapeutic Systems in Palo Alto, and David's future CEO, Rodney Pearlman, an energetic Australian transplant who had also worked at Genentech. In June 1998, Pearlman and Diamond sat down at a Palo Alto restaurant to sketch plans for the startup.

Meanwhile, Diamond had unearthed another promising memory enhancer by digging through reams of patent filings--a compound discovered a decade earlier by Mondadori's team at Ciba-Geigy. After talking to Mondadori, who had left the company in 1994 and now works at a French biotech startup called Neuro3D, "I realized I'd hit another vein of gold," Diamond says.

Gritty and unorthodox, Mondadori had spearheaded an ambitious effort to develop memory enhancers in the 1980s. One of his first achievements was to improve animal tests used to register drugs' effects on memory. Typically such tests involve giving rodents experimental compounds, then observing how well they retain new information over minutes to hours. But such tests don't get at the kind of memory enhancement that aging humans really care about, such as improved ability to summon up details of something that happened yesterday or last week, argues Mondadori. "I wanted to find compounds that facilitate retrieval in older animals," he adds.

To do that, his team maintained a colony of elderly mice, all of which had undergone a singular learning experience: Each animal was placed on a raised platform near the entrance to a dark, den-like compartment, like a cliff dweller's home. When the mouse instinctively tried to hide in the enclosure, it was repelled by a mild foot shock--the floor was electrified. If the mouse was removed and, a few hours later, returned to the platform, it would remember to defy instinct and stay out of the shelter. But Mondadori's team found that over several weeks the memory would fade and the rodent would act as if it had never been shocked. That is, unless it were under the influence of a drug that boosted memory in just the way Mondadori wanted.

After screening some 400 drug candidates with the test, his team finally hit paydirt: A compound they dubbed 006 enabled mice to remember the shocking experience for a full two months--an eternity to a doddering rodent. The researchers eventually found two other compounds that passed the demanding test, though one proved too unstable to formulate as a drug. The slim pickings didn't faze Mondadori--as his team advanced the two drugs toward clinical trials, it became clear that they could run circles around existing drugs like piracetam in a broad array of animal tests. But after more than a decade of work, the company put the project on a back burner. "Upper management decided to concentrate on Alzheimer's disease and stroke" rather than iffy problems like mild cognitive impairment, says Mondadori, who resigned soon after.

Fast-forward to 1997. "One Sunday evening I got a call from a man named Buddy Diamond," Mondadori says. "It was very strange. Somehow he knew about our work on 006," which had never been published in medical journals. "He asked me if it would be available to license from Novartis." With Mondadori's help, Diamond contacted the Swiss company and, after months of tricky negotiations, persuaded it to farm out the stalled project to his startup. Following up on the coup, David CEO Pearlman negotiated a license for the second Novartis drug.

With the Russian and Novartis drugs in its pipeline, David was set to seek a first round of venture funding. But Pearlman, who had taken over fundraising, faced a stiff challenge--after high-tech stocks tanked in early 2000, VCs got very stingy. Criss-crossing the country for a year, Pearlman finally assembled a respectable $11 million first round that closed in April. But there was a cost: Diamond, whose role was diminished when the VCs took seats on the board, left the company. "My vision was abandoned," he asserts. Pearlman counters that "once we moved the company from a vision into reality, the vision itself had to change." The products may still ultimately help Down sufferers.

Despite losing its pharmaco-archeologist, David Pharma has nimbly darted to the vanguard in the race to develop drugs for mild cognitive impairment. Two of its three medicines have already undergone early safety tests in humans, and efficacy trials are expected to begin within months. In September, NeuroInvestment spotlighted David as one of only two companies poised to obtain efficacy data on novel drugs for MCI over the next two years. (The other is Cortex.)

Several companies, including Memory Pharmaceuticals, should follow soon after with effectiveness data on other drugs for MCI, predicts NeuroInvestment. The progress at large drug companies, which have now entered the race but for competitive reasons rarely talk about early-stage projects, is harder to gauge. Given that boomers and other memory-challenged pill poppers already shell out an estimated $1 billion annually for ginkgo alone, there's little doubt that Big Pharma is putting serious money into the quest for cognitive Viagras. Who knows? As we boomers jog into the sunset, maybe we won't need to be chased by roving vans after all.

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