One may wonder why the horseshoe crab is sensitive to endotoxin and, furthermore, how does the crab benefit from this phenomenon? As we know, seawater is a virtual "bacterial soup". Typical near-shore areas that form the prime habitat of the horseshoe crab can easily contain over one billion Gram-negative bacteria per milliliter of seawater. Thus, the horseshoe crab is constantly threatened with infection. Unlike mammals, including humans, the horseshoe crab lacks an immune system; it cannot develop antibodies to fight infection. However, the horseshoe crab does contain a number of compounds that will bind to and inactivate bacteria, fungi, and viruses. The components of LAL are part of this primitive "immune" system. The components in LAL, for example, not only bind and inactivate bacterial endotoxin, but the clot formed as a result of activation by endotoxin provides wound control by preventing bleeding and forming a physical barrier against additional bacterial entry and infection. It is one of the marvels of evolution that the horseshoe crab uses endotoxin as a signal for wound occurrence and as an extremely effective defense against infection.Photo via Fresh Photons, but to read about this, I recommend the Horseshoecrab.org website.
Addendum: A related story in the Washington Post in May 2012 reports at least an apparent temporary recovery in crab numbers.
Reposted from 2011 to add this update:
Conservationists fear that horseshoe crabs, a 450-million-year-old living fossil, will be pushed to the brink of extinction because of the value of their blood to the pharmaceutical industry. Horseshoe crab blood provides a natural source of limulus amebocyte lysate (LAL) which is used to test vaccines, drugs, and medical devices to ensure that they aren’t contaminated with dangerous bacterial toxins called endotoxins. With hundreds of thousands of horseshoe crabs captured and bled of their milky-blue blood each year, conservation groups are now stepping up their advocacy efforts and taking legal action to help save horseshoe crabs and the other species that rely on them.Fortunately, there’s already an alternative to horseshoe crab blood: in the late 1990s, biologists at the University of Singapore created a synthetic version of the LAL called recombinant Factor C (rFC). Multiple studies show that rFC is just as effective as horseshoe crab-derived LAL, and it is currently commercially available...In the Delaware Bay, home to the largest population in the US, horseshoe crab numbers have declined from 1.24 million in 1990 to less than 334,000 in 2002. Although the population appears to have stabilized, conservationists worry that increased demand for American horseshoe crab blood by the pharmaceutical industry could force it to go the way of the Asian horseshoe crab, Tachypleus tridentatus, which is rapidly disappearing in China and which the International Union for Conservation of Nature (IUCN) lists as endangered. Currently, the American horseshoe crab is listed as a vulnerable species.The debate is particularly critical today; the COVID-19 pandemic has fueled a huge surge of research into vaccines and potential COVID-19 treatments which rely on the use of LAL to ensure product safety. As demand for vaccines and other medical products increases, conservationists worry that without a rapid switch to rFC, strain on the American horseshoe crab and the other creatures that rely on them will only get worse.