By Mary Welch

Two small biotechnology companies, BioQuest Inc. and BioKeys Inc., will merge.

"The reason why BioQuest and BioKeys got together is easy," said Warren Lau, president of Houston-based BioQuest Inc. "BioKeys has interesting technology and is further along with its pipeline. We are involved with the M.D. Anderson Cancer Center [in Houston], which gives us good synergy."

Terms of the merger could not be disclosed, he said. "This is not a reverse merger. There will be no dominant factor at the end of the day."

Privately held BioKeys is a development stage pharmaceutical company that has a lead compound, Co-factor, about to start Phase III trials. Co-factor is a biomodulator that has been shown to greatly enhance the activity of 5-fluorouracil (5-FU), a widely used chemotherapeutic, in colorectal and breast cancer.

In addition, the San Diego-based company is in preclinical studies with a platform technology for orgaoselenones, a family of cancer chemotherapeutics. These compounds are expected to address the tumor resistance to platinating and alkylating chemotherapeutic compounds that can be seen in cancers of the brain, head and neck, ovary and breast, the company said.

BioKeys also is in preclinical studies with thiovir, a compound in a family of orally bioavailable anti-HIV, anti-HIV opportunistic infectious agent and human papilloma virus antivirals.

BioQuest's focus is in the field of HIV/AIDS antiviral therapy, prophylaxis and vaccine development. Its antibody-negative, cell-mediated immunity vaccine is now being tested in rhesus monkeys using a chimeric simian/human immunodeficiency virus.

Also in the preclinical stage is R15K, a blocking agent designed to prevent HIV from entering and infecting human immune system cells, and S4S, which has been shown in vitro to be able to attack and disable the proteins HIV uses to bind to and infect human immune system cells.

Another benefit of the merger, Lau said, is that Frank O'Donnell, BioKeys' chairman and CEO, is also chairman of American Prescription Providers (APP), of Melville, N.Y. APP is the largest provider of HIV/AIDS prescription drugs in the Northeast.

"That's an excellent way for the pipeline to get into the new Internet pharmacy area," Lau said.

O'Donnell, who also founded Visx Inc., of Santa Clara, Calif., will remain CEO of the new company, which will probably be based in San Diego. Ross Johnson, former president and CEO of Trimeris Inc., of Durham, N. C., will serve as chairman of the board of the new company. Lau will remain as the new company's chief financial officer and its liaison to the M.D. Anderson Cancer Center.

BioQuest's stock trades on the Pink Sheets.