Northstar Neuroscience is toast. The Seattle-based medical device company, which failed to develop an electrical stimulation machine that would enable stroke patients to regain arm movement, said today its board has decided to shut down the company and liquidate its assets.
The company (NASDAQ: [[ticker:NSTR]]) will lay off most of its remaining employees as it goes through the steps of an “orderly wind down,” and stock delisting, Northstar said today in a statement. The plan, which will involve paying off remaining liabilities like its lease and clinical trial obligations, as well as distributing cash to shareholders, must be approved by shareholders at a special meeting. Northstar said it had 38 employees left at the end of July, when it made its last round of layoffs.
Northstar has been under pressure to close its doors from one of its largest shareholders, Boston-based RA Capital. Peter Kolchinsky, the firm’s managing member, wrote an angry letter to the company last month urging it to close its doors and fork over its remaining cash to shareholders. The company’s stock crashed 80 percent a year ago when it failed in a trial of its device to help stroke patients regain arm movement. Instead of liquidating, Northstar tried to regroup by cutting costs and switching its priority to using the device to treat severe depression.
Wall Street essentially gave that zero chance of success. Even though Northstar had $70.2 million in cash and investments at the end of September, investors gave the company a stock market valuation of under $27 million in early December. That’s when RA Capital started screaming to shut the company down, and spread the cash among shareholders, while it still had some left.
Northstar was founded in 1999 as Vertis Neuroscience, and the original goal was to develop electrical stimulation for chronic back pain. That product was eventually divested. In the end, the company ended up accumulating a deficit of more than $132 million through the end of September, according to its most recent quarterly report with the Securities & Exchange Commission.
