The prospect of a billion people nearing the age when they risk brain-related illnesses like Alzheimer's disease or chronic pain is helping...

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SAN JOSE, Calif. — The prospect of a billion people nearing the age when they risk brain-related illnesses like Alzheimer’s disease or chronic pain is helping fuel a costly scramble by biotechnology firms to find solutions.

The San Francisco Bay Area has more than 30 companies, out of about 300 worldwide, developing brain-related products for everything from sleep and anxiety disorders to multiple sclerosis and stroke. Much of the focus of “the brain industry,” as it is dubbed, is on finding treatments for ailments likely to hit aging baby boomers.

“The demand for better cognitive therapeutics is exploding,” concluded a study of the brain industry made public in July by NeuroInsights, a San Francisco research firm. “One quarter of the population will be at high risk for cognitive impairment and Alzheimer’s disease by 2025.”

The report estimated the worldwide revenue for this neurotechnology niche at $100 billion last year, a 13 percent increase from 2003, with the lion’s share of that produced by a few established drug companies. As potentially lucrative as the brain business is, however, it’s extremely risky, even for the precarious biotechnology industry.

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“There’s an incredible market for this stuff, but it’s a tough field,” said Samuel Barondes, director of the Center for Neurobiology and Psychiatry at the University of California, San Francisco.

Most of the niche’s newcomers don’t have products on the market yet.

History of challenges

Consider Pain Therapeutics, which obtained three rounds of venture-capital financing before going public in 2000. From its founding in 1998 through March 2005, it has suffered net losses totaling nearly $121 million developing its drugs.

Two of the firm’s medicines are aimed at supplanting the popular narcotic painkiller, oxycodone, which can become addictive. One would eliminate the withdrawal symptoms associated with the medical use of the narcotic, and the other would make it harder for addicts to tamper with the drug so that it gives them a bigger high.

Assuming the Food and Drug Administration approves Pain Therapeutics’ products, the company expects to have at least one of its drugs on the market in two years.

“We expect to incur substantial losses for the foreseeable future and we may never become profitable,” the company warned in a May regulatory filing.

Despite that, Remi Barbier, the company’s 45-year-old founder and chief executive, brims with optimism.

“We have extremely big vision and big dreams, and we’re close to achieving those dreams,” he said. He added that several large pharmaceutical companies recently have made inquiries about buying Pain Therapeutics.

In fact, the neurotech sector is being flooded with money because of the profits a brain-related blockbuster could generate. From 1999 to 2004, infusions of venture capital to fledgling companies reached nearly $6 billion.

Among the investors is NeuroVentures Capital.

Of all the biotechnology sectors, “this is the riskiest,” said Mark Cochran, the Virginia firm’s managing director. But he said the gamble is worth it because “we see a huge unmet medical need.”

One Bay Area company Cochran’s firm has financed is Saegis Pharmaceuticals of Half Moon Bay, Calif., which is developing drugs to treat memory loss and other cognitive impairments. The company hopes to complete mid-level clinical trials this year on its main prospect, aimed at treating mild Alzheimer’s disease and other disorders.

Some are cautious about the industry’s prospects, including Harry Tracy, president of NI Research, which produces neurotechnology publications. He fears that instead of developing drugs from scratch, too many brain-industry companies are trying to cut research costs by finding new applications for medicines already approved by the FDA.

While that approach sometimes works, he noted, “there is a limit to how much gold they’re going to find in other people’s attics.”

Developing devices

Tracy also is skeptical of some of the neurotech medical devices being developed, because “it’s going to take a lot of neurosurgeons” to implant those gadgets in patients, he said, which can limit how fast companies making the devices can grow.

That’s a problem facing Micrus Endovascular of Sunnyvale, Calif., a 9-year-old company that announced in June it was going public. Micrus sells tiny coils doctors use to treat aneurysms, a balloonlike bulge in arteries feeding blood to the brain.

The coils, which are threaded through the patient’s leg to fill the bulge, help prevent the aneurysm from rupturing and causing a fatal stroke. But only about 280 doctors in the United States use the coils, the company reported in its initial public offering, and about 100 of them perform 80 percent of the procedures.

Although devices account for 3 percent of the brain industry’s revenue, the report said, some of the hardware being rolled out is arousing interest.

Take BioControl Systems. Founded in 1989 by two Stanford alumni, it makes devices that allow people to control computerized equipment with their nerve impulses.

The instruments are aimed at helping everyone from paraplegics whose hands can’t operate electronic devices to stroke patients who might wear the devices while recovering at home so their doctors could monitor their health.

BioControl had success selling an early design. But the gadget was bulky and required the user to be hooked up by sticky electrodes, making it impractical. In the late 1990s, the company went into a dormant state, said co-founder Ben Knapp, former chairman of San Jose State University’s Department of Computer Information and Systems Engineering Department.

But recently smaller electronic components, wireless technology and new types of electrodes have enabled the company to make a smaller, portable and less intrusive brain-machine interface.

The company recently sold some of its new devices to a British defense contractor for monitoring the stress levels of troops undergoing training, among other things.