By Brady Huggett

ViroLogic Inc. closed the first segment of a $16.3 million private placement, pulling in about $6.7 million, and said it will use the proceeds to help commercialize its assay line.

The South San Francisco-based company is issuing 6 percent convertible preferred stock in the double-portioned placement, and purchasers also will receive warrants to purchase 3.2 million shares. Both the preferred stock and the warrants are being offered at a premium to the market price at the time of conversion or exercising, based on the average closing price of the stock 10 days prior to the transaction.

¿The significance [of the placement] is that it allows us to more fully develop the technology we have and commercialize it,¿ said William Young, CEO of ViroLogic. ¿We are already doing these things but it gives us extra resources at the company.¿

ViroLogic¿s stock (NASDAQ:VLGC) rose 43 cents Tuesday, or about 18.5 percent, to close at $2.75.

UBS Warburg LLC, of Stamford, Conn., and CIBC World Markets, of New York, are acting as advisers for the placement.

Karen Wilson, chief financial officer at ViroLogic, said the company had a cash position of about $18.9 million at the end of the first quarter. The company has slightly more than 20 million shares outstanding, she said, adding that ViroLogic¿s first-quarter burn rate was about $6 million. ViroLogic will have its second-quarter earnings call on Aug. 7.

¿But we do expect [our burn rate] to decline as we ramp up our sales,¿ she said.

Completion of the second half of the financing has one condition: shareholder approval.

¿It should take about 45 days,¿ Young said. ¿We can¿t offer more than 19.9 percent of the company without shareholder approval.¿

ViroLogic¿s flagship product, PhenoSense HIV, allows physicians to measure the level of clinically significant HIV drug resistance. Although ViroLogic didn¿t break out PhenoSense sales in its first-quarter numbers, Young said ViroLogic saw $3.1 million in revenue in the quarter, ¿all of it from product sales.¿ ViroLogic has a modification of its technology to measure HIV fusion inhibitors and also a modification to measure the replication fitness of the virus. Both assays, Young said, would most likely be available for pharmaceutical companies first.

Also, ViroLogic is working on assays for hepatitis B and C viruses, and Young said part of the proceeds from the placement will be used to fund research and development and the eventual scale-up of those products.

ViroLogic markets its product to both pharmaceutical companies and in the doctor arena, Young said, adding that ViroLogic has the ability to do what many people simply talk about: tailoring HIV therapies to each patient.

¿We have the best technologies for drug resistance in HIV, and the task is to make them widely available for physicians,¿ he said. ¿We are providing tools to physicians for individual therapies based on their virus. Not many people are actually practicing it. We are way out in front of the crowd on that one.¿