ViroLogic Announces Second Quarter 2005 Financial Results

ViroLogic Announces Second Quarter 2005 Financial Results
- HIV clinical trials provide boost to testing revenues - 35% revenue growth -



SOUTH SAN FRANCISCO, Calif., July 25  /PRNewswire-FirstCall/ -- ViroLogic, Inc.
(NASDAQ:VLGC) today reported financial results for the second quarter ended June
30, 2005.

Second Quarter Results

The Company had record revenue of $12.4 million for the second quarter of 2005,
which was 35 percent higher than revenue of $9.2 million for the second quarter
of 2004.  Driving the increase in revenue was revenue from the Company's HIV
pharmaceutical testing products, which was $4.7 million in the second quarter
of 2005 compared to $2.3 million for the same period in 2004. Revenue from the
Company's HIV patient testing products was $6.3 million in the second quarter
of 2005 compared to $6.5 million in the second quarter of 2004.  Revenue from
oncology and eTag(TM) collaborations was $0.7 million for the second quarter of
2005.

"Multiple late stage trials for the new class of CCR5 entry inhibitor drugs for
HIV are providing a strong boost to our revenue," said William D. Young,
Chairman and CEO of ViroLogic.  "Our tests are an important element of the
trial protocols for all three drugs moving into phase III clinical trials this
year.  The first of these trials started earlier in the year and has generated
significant revenue for us in the current quarter. The second trial has just
started and the third is expected to start later this year."

For the second quarter of 2005, a net profit was recorded due to the favorable
adjustment to the CVR liability, although on a proforma basis, as described
below, a net loss was recorded.  For the second quarter of 2005, the net income
was $0.7 million, or $0.01 per common share, compared to a net loss of $1.4
million, or $0.03 per common share, for the same period in 2004. Included in
the results for 2005 were substantial non-cash items, which are described below
under "Proforma Results".  On a proforma basis, adjusted for these non-cash
items, the net loss was $2.6 million, or $0.02 per share, in the second quarter
of 2005 compared to a net loss of $1.4 million, or $0.03 per share, in the same
period of 2004.

Six Month Results

The Company reported revenue of $22.4 million for the first half of 2005, an
increase of 23 percent over revenue of $18.2 million for the same period of
2004.

Net loss for the first half of 2005 was $6.7 million, or $0.06 per common
share, compared to a net loss of $2.6 million, or $0.05 per common share, for
the same period in 2004.  On a proforma basis, adjusted for the non-cash items
described below, the net loss was $6.7 million, or $0.06 per share, in the
first half of 2005 compared to $2.6 million, or $0.05 per share, in the same
period of 2004.  The net loss on GAAP and proforma bases are the same because
for the six months ended June 30, 2005 the impact of stock based compensation
was offset by the change in the CVR liability.

Cash Resources

The Company had $74.0 million of cash, cash equivalents, short-term investments
and restricted cash at June 30, 2005.  The net decrease in these balances during
the second quarter of 2005 was $1.0 million, after giving effect to $1.3 million
in proceeds received from the exercise of warrants during the quarter.  Cash
used for operations was $1.8 million for the second quarter of 2005.  We are
increasing our guidance for year end cash and now expect to end 2005 with over
$65 million in cash, cash equivalents and investments.

  Recent Corporate Highlights

  HIV:

   * Provided testing services in the first of three anticipated
     pharmaceutical customers' large phase III clinical trials of a new
     class of CCR5 entry inhibitor drugs and began testing for a second
     phase III clinical trial in July.

   * Signed a multi-year services agreement with Schering-Plough for our
     testing services in their upcoming phase III clinical trial of a new
     CCR5 entry inhibitor drug, the third such trial in which our tests are
     expected to be used this year.

   * Authored or co-authored 12 presentations for the XIV International HIV
     Drug Resistance Workshop in June 2005.

  Oncology:

   * Completed the consolidation of former ACLARA operations with relocation
     of all of the technical staff from Mountain View to South San
     Francisco, established eTag lab in our South San Francisco facility and
     continued to conduct reproducibility and validation studies in order to
     achieve full validation of eTag assays in a CLIA environment.

   * Continued to analyze more than 700 samples from various collaborators,
     and related to several cancer types and drugs, to construct correlation
     algorithms that successfully predict patient response to targeted
     therapies.

   * Continued to work on the cancer biomarker study of AstraZeneca's
     Iressa(R), a selective epidermal growth factor receptor tyrosine kinase
     inhibitor.  ViroLogic, utilizing its proprietary eTag assays, has
     received and is in the process of analyzing approximately 150 tumor
     samples from AstraZeneca's clinical trials of Iressa to evaluate the
     effectiveness of these assays in targeting patients who would most
     likely benefit from Iressa.

   * Presented several posters and publications about eTag technology at the
     American Society of Clinical Oncology Annual Meeting (ASCO) in May
     2005.

  Outlook


In the remainder of 2005, ViroLogic expects continued progress in its HIV
testing businesses and expects to leverage its experience and infrastructure in
infectious disease to oncology by validating eTag assays as predictive tools for
targeted cancer therapies.  With increased focus from the medical community and
the FDA on the need for better targeting of drugs, especially for diseases such
as cancer and HIV, we believe that the current and proposed evaluations of our
eTag technology will help pave the way for its commercial introduction.

  Specifically, the Company intends to accomplish the following:

  HIV:

   * Grow HIV pharmaceutical testing revenues in 2005 and 2006 driven by the
     use of ViroLogic's PhenoSense(TM) HIV Co-receptor Tropism assay to
     identify patients for, and to monitor response to, drug treatment
     during clinical trials of the CCR5 entry inhibitors. If successful in
     clinical trials, the approval of these drugs could provide a boost to
     future patient testing revenues;

   * Maintain our leadership with HIV patient testing services, though
     seasonal variability in revenues may occur from quarter to quarter and
     the inclusion of patients in clinical trials may adversely affect
     patient testing revenues, while positively impacting pharmaceutical
     testing revenues; and,

   * Develop clinical data for the Replication Capacity HIV(TM), PhenoSense
     and GeneSeq(TM) HIV Entry and PhenoSense(TM) HIV Co-receptor Tropism
     assays to support the commercial launch of these products for the HIV
     patient testing business.

  Oncology:

   * Continue to receive and evaluate a significant number of patient tumor
     samples over the remainder of 2005 to establish correlations between
     identified biomarkers and clinical outcome;

   * Generate initial revenue from pharmaceutical collaborations in 2005,
     and continue working with several pharmaceutical and biotechnology
     companies evaluating eTag technology for drug discovery and
     development; and,

   * Prepare to launch our first commercial eTag assay in oncology, a test
     panel measuring activated EGF receptors related to approved targeted
     cancer therapies during 2006.  To achieve this goal, the Company plans
     to:

      1. Transfer eTag assays from the research setting to our CLIA
         certified clinical laboratory, a process that is expected to be
         completed during 2005; and,

      2. Conduct independent validation and clinical studies with
         pharmaceutical companies and with clinical collaborators to
         establish the ability of eTag assays to correctly distinguish
         between responders and non-responders to specific drug therapies.

  Proforma Results


There were several non-cash items that affected results for the quarter ended
June 30, 2005 and were recorded as follows:

   * A "mark-to-market" adjustment to the liability established for the
     potential payment on the Contingent Value Rights (CVRs) issued as part
     of the purchase consideration for ACLARA.  Subsequent to the closing of
     the merger, an active trading market had been established, and this
     liability was revalued based on the actual closing price of the CVRs on
     the OTC bulletin board, or $0.23 per CVR at December 31, 2004, $0.31 at
     March 31, 2005 and $0.25 at June 30, 2005.  This revaluation led to a
     $4.1 million favorable adjustment to the liability in the second
     quarter of 2005 and this is reflected as non-operating income in the
     statement of operations.  Further revaluations will be done each
     quarter while the CVRs remain outstanding.

   * An unfavorable non-cash expense of $0.7 million for stock based
     compensation including the unfavorable impact in the quarter of
     variable accounting on all former ACLARA stock options as a result of
     the CVRs, recognition of expense based on the value of CVRs related to
     former ACLARA stock options that vested during the period, and
     amortization of deferred compensation.



We are reporting proforma results excluding these items to provide a clearer
view of ongoing expenses without the impact of merger-related costs.

Capital Structure

During the second quarter, the remaining holders of all of our Series A
Preferred Stock exercised their right to convert their Preferred Stock into 2.3
million shares of our Common Stock.  Also during the quarter, we issued 1.8
million shares of Common Stock upon exercise of outstanding warrants and
received $1.3 million in cash in relation to certain of these exercises.  At
June 30, 2005, there were no shares of Preferred Stock outstanding, warrants
outstanding were exercisable into 3.6 million shares of our Common Stock and a
total of 126.3 million shares of our Common Stock were outstanding.

Conference Call Details

ViroLogic will host a conference call today at 10:00 a.m. Eastern Time. To
participate in the live teleconference call 800-299-9630 fifteen minutes before
the conference begins.  International callers please dial 617-786-2904.
Conference participant passcode is 50668032.  Live audio of the call will be
simultaneously broadcast over the Internet and will be available to members of
the news media, investors and the general public. Access to live and archived
audio of the conference call will be available by following the appropriate
links at http://www.virologic.com/ and clicking on the Investor Relations link.
Following the live broadcast, a replay of the call will also be available at
888-286-8010 or 617-801-6888 for international callers, until August 5, 2005.
The replay passcode is 28160002.

The information provided on the teleconference is only accurate at the time of
the conference call, and ViroLogic will take no responsibility for providing
updated information except as required by law.

About ViroLogic

ViroLogic is a biotechnology company advancing individualized medicine by
discovering, developing and marketing innovative products to guide and improve
treatment of serious infectious diseases and cancer. The Company's products are
designed to help doctors optimize treatment regimens for their patients that
lead to better outcomes and reduced costs. The Company's technology is also
being used by numerous biopharmaceutical companies to develop new and improved
antiviral therapeutics and vaccines as well as targeted cancer therapeutics.
More information about the Company and its technology can be found on its web
site at http://www.virologic.com/.

Forward Looking Statements

Certain statements in this press release are forward-looking, including
statements regarding the expected timing of phase III clinical trials for
certain CCR5 entry inhibitor drugs, the Company's expected year-end cash
resources, anticipated operating results and activities for 2005, the potential
impact for entry-inhibitor drugs on future patient testing revenues, the trend
toward individualized medicine and the results of yet-to-be completed clinical
and validation studies related to the effectiveness of our eTag assays as
predictive tools for targeted cancer therapies. These forward-looking
statements are subject to risks and uncertainties and other factors, which may
cause actual results to differ materially from the anticipated results or other
expectations expressed in such forward-looking statements. These risks and
uncertainties include, but are not limited to, risks and uncertainties relating
to the development of future products, the timing and ultimate size of
pharmaceutical company clinical trials; the anticipated timing of the launch on
an eTag product; the performance of our products; our ability to successfully
conduct clinical studies and the results obtained from those studies; whether
larger confirmatory clinical studies will confirm the results of initial
studies; whether the collaboration with AstraZeneca will yield favorable
results regarding the predictive capability of eTag assays for responsiveness
to Iressa; our ability to establish reliable, high-volume operations at
commercially reasonable costs; our ability to successfully integrate the
operations of ACLARA into our operations; expected reliance on a few customers
for the majority of our revenues; the annual renewal of certain customer
agreements including those with Quest Diagnostics, Pfizer, GSK, and
Schering-Plough; our ability to hire and retain key personnel, competition from
larger more established diagnostic providers; actual market acceptance of our
products and adoption of our technological approach and products by
pharmaceutical and biotechnology companies; our estimate of the size of our
markets; our estimates of the level of demand for our products; whether payors
will authorize reimbursement for our products; whether the FDA or any other
agency will seek to regulate ViroLogic's in house clinical laboratory testing;
our ability to comply with FDA regulations in order to establish and maintain
diagnostic kit manufacturing operations; whether we will encounter problems or
delays in establishing and validating eTag assays within our clinical
laboratory; whether we will encounter problems or delays in automating our
processes or expanding our capacity; whether the intellectual property
underlying the Company's technology is adequate; whether we may be deemed to
infringe on the intellectual property of others and whether licenses to third
party technology will be available; whether ViroLogic is able to build brand
loyalty and expand revenues; the potential impact of any payments under the
CVRs on our common stock and capital resources; and whether ViroLogic will be
able to raise sufficient capital when required. For a discussion of other
factors that may cause ViroLogic's actual events to differ from those
projected, please refer to the Company's most recent annual report on Form 10-K
and quarterly reports on Form 10-Q, as well as other subsequent filings with the
Securities and Exchange Commission.  We do not undertake, and specifically
disclaim any obligation, to revise any forward-looking statements to reflect
the occurrence of anticipated or unanticipated events or circumstances after
the date of such statements.

PhenoSense and eTag are trademarks of ViroLogic, Inc.  Iressa is a registered
trademark of AstraZeneca plc.

                             VIROLOGIC, INC.
                  SELECTED STATEMENTS OF OPERATIONS DATA
                 (In thousands, except per share amounts)

                                       Three Months Ended  Six Months Ended
                                             June 30,          June 30,
                                           2005     2004     2005     2004
                                                     (Unaudited)
  Revenue:
   Product revenue                       $11,005   $8,734  $19,858  $17,374
   Contract revenue                        1,409      493    2,550      875

   Total revenue                          12,414    9,227   22,408   18,249

  Operating costs and expenses:
   Cost of product revenue                 4,788    4,475    9,000    8,891
   Research and development                5,049    1,600    9,155    2,993
   Sales and marketing                     3,365    2,784    5,928    4,742
   General and administrative              3,155    1,750    4,857    3,830
   Lease termination charge                    -        -        -      433

  Total operating costs and expenses      16,357   10,609   28,940   20,889

  Operating loss                          (3,943)  (1,382)  (6,532)  (2,640)

  Interest and other income, net             569       11    1,104       21
  CVR valuation adjustment                 4,062        -   (1,244)       -

  Net income/(loss)                         $688  $(1,371) $(6,672) $(2,619)

  Net income/(loss) per common share,
   basic                                   $0.01   $(0.03)  $(0.06)  $(0.05)

  Weighted-average shares used in
   computing basic net income/(loss)
   per common share                      122,815   53,494  120,099   53,376

  Reconciliation of Proforma Results to
   GAAP
  Net income/(loss)                         $688  $(1,371) $(6,672) $(2,619)
  Adjustments for non-cash items:
  CVR valuation adjustment                (4,062)       -    1,244        -
  Stock based compensation                   741        -   (1,246)       -

  Proforma net loss                      $(2,633) $(1,371) $(6,674) $(2,619)

  Proforma net loss per common share      $(0.02)  $(0.03)  $(0.06)  $(0.05)

  Management believes that this proforma financial data supplements our GAAP
  financial statements by providing investors with additional information
  which allows them to have a clearer picture of the company's operations,
  financial performance and the comparability of the company's operating
  results from period to period. The presentation of this additional
  information is not meant to be considered in isolation or as a substitute
  for results prepared in accordance with GAAP.  Above, we have provided a
  reconciliation of the proforma financial information with the comparable
  financial information reported in accordance with GAAP.



                             VIROLOGIC, INC.
                       SELECTED BALANCE SHEET DATA
                              (In thousands)

                                                June 30,        December 31,
                                                   2005              2004
                                               (unaudited)         (Note 1)

  ASSETS
  Current assets:
  Cash and cash equivalents                       $9,430            $6,027
  Short-term investments                          64,487            72,821
  Restricted cash                                     50               350
  Accounts receivable                              6,723             7,251
  Prepaid expenses                                 1,024               838
  Inventory                                        1,104             1,059
  Other current assets                               833               584
     Total current assets                         83,651            88,930

  Property and equipment, net                      9,036             8,369
  Goodwill                                         9,927             8,282
  Other assets                                     2,159             2,054

     Total assets                               $104,773          $107,635


  LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
  Accounts payable                                $1,833            $3,222
  Accrued compensation                             2,099             1,697
  Accrued liabilities                              3,749             6,993
  Current portion of restructuring costs           2,084             2,519
  Deferred revenue                                 2,011               546
  Current portion of loans payable and
   capital lease obligations                          88               490
  Contingent value rights                         16,659                 -
     Total current liabilities                    28,523            15,467

  Long-term portion of restructuring costs         2,420             1,710
  Contingent value rights                              -            15,269
  Other long-term liabilities                        641               706
  Redeemable convertible preferred stock               -             1,810
  Commitments

  Stockholders' equity:
  Common stock                                       126               116
  Additional paid-in capital                     267,929           260,591
  Accumulated other comprehensive loss              (337)              (57)
  Deferred compensation                             (155)             (275)
  Accumulated deficit                           (194,374)         (187,702)
     Total stockholders' equity                   73,189            72,673

     Total liabilities and
      stockholders' equity                      $104,773          $107,635

      (1) The balance sheet data is derived from audited financial
          statements for the year ended December 31, 2004, included in the
          Company's Annual Report on Form 10-K filed with the Securities and
          Exchange Commission.


DATASOURCE: ViroLogic, Inc.



CONTACT:  Alfred Merriweather, Vice President and CFO of ViroLogic,

[phone]; or Carolyn Bumgardner Wang of WeissComm Partners,

[phone], , for ViroLogic, Inc.



Web site:  http://www.virologic.com/ 

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