By Mary Welch

Biotechnology company Procept Inc. signed a nonbinding letter of intent to absorb Heaven's Door Corp., a private Internet-based company that offers a variety of funeral services.

For Cambridge, Mass.-based Procept, the deal's lure is cash from Heaven's Door. For Coral Springs, Fla.-based Heaven's Door, the carrot is Procept's Nasdaq listing, which it said would make it the first Nasdaq-traded Internet company that focuses on the funeral industry.

"That's certainly one way to look at the proposal, one interpretation," Procept spokeswoman Dian Griesel said when asked of the benefits the companies bring to the table. "Mergers are arranged for several reasons. Procept needs to keep its pipeline moving forward as we develop PRO 2000 gel and 06-Benzylguanine. We've been actively searching for financing and nothing's materialized. This is another way to offer an upside to our shareholders."

Procept reported having about $6 million in cash on June 30, enough to last through June 2000. It's net loss for the quarter was $787,000.

Griesel is quick to point out that Procept's inability to obtain sufficient funding through a more conventional method or a biotechnology-related merger does not reflect on the company's two main products in development.

"We are very confident of our products and we know they will be successful and partnered," she said. "That is not the problem. However, they are in early clinical development. PRO 2000 gel will involve a long and complex trial - probably about 2,000 women using a topical gel that they have to apply before intercourse. It's three years out [from FDA approval]. It was getting to the point where at the end of the day we realized we needed money."

In fact the company currently has 15 possible suitors to partner its products, she said.

Procept and its PRO 2000 product have faced financial and regulatory setbacks for years as the company previously failed in attempts to develop other formulations of the product.

The company started looking elsewhere for financing and came across Heaven's Door. Although financial arrangements were not disclosed, if the deal is approved, Procept will own about 60 percent of the new public Internet company and will retain 100 percent of the value of the biotechnology assets. Procept will issue new shares of Procept common stock to HDC shareholders in exchange for all HDC equity. Not only will the deal be structured so the value of Procept's drug development compounds are reserved for the pre-merger Procept stockholders, but it also will allow the company to sell the biotechnology assets to a larger biotechnology or pharmaceutical company.

Procept's president and CEO, John Dee, will assume the same duties in the new company, Griesel said.

PRO 2000 gel is being developed as a vaginal, topical microbicide designed to provide protection against HIV infection and other sexually transmitted diseases. Two Phase I trials showed that the gel was safe and well tolerated in healthy, sexually abstinent women. A larger study with sexually active women and HIV-infected women is scheduled to start shortly in the U.S. and South Africa.

The second drug, 06-Benzylguanine (BG), is a chemosensitizer that is designed to overcome resistance to a significant class of commonly used chemotherapeutic agents known as 06-alkylating agents. In preclinical studies, treatment with BG and BCNU - a common alkylating agent - increased the anti-tumor activity of BCNU in brain, colon and prostate cancers, according to the company. A Phase II trial is scheduled to start in accordance with a research agreement with the National Cancer Institute.

Heaven's Door provides a comprehensive range of products and services that relate to the funeral services industry. It later plans to expand this concept to other products and services such as the long-term care and nursing home industry and financial/estate planning.

The company's Web site provides information concerning the pre-arrangement and handling of funeral-related services, such as transporting a body from one location to another, purchasing flowers, writing online obituaries and testimonials, spotlighting a funeral home, and allowing family and friends to take a "virtual visit" of a loved one's burial site.

"This deal, if it goes through, will increase shareholder value and presents new opportunity to create value," Griesel said.

The proposed merger was disclosed Wednesday. Procept's (NASDAQ:PRCT) stock fell 62.5 cents Wednesday, or 27 percent, and lost 3 cents Thursday to close at $1.625.