Northstar Neuroscience to dissolve, return cash to investors

The Seattle life science community continues to take a drubbing. The latest blow came today with news that medical device maker Northstar Neuroscience -- a publicly-traded company that had raised $112 million in its IPO -- plans to liquidate assets and dissolve.

The company has been in trouble for months. In July, the money-losing company announced that it would be shutting down development programs, cutting staff and subleasing a portion of its headquarters. At the time of those moves, Northstar reported $74 million in cash and said it planned to end the year with $59 million on the books.

In February of last year, the company cut nearly one third of its staff, about 58 employees, after learning that the FDA would not approve its cortical stimulation therapy for stroke survivors.

Founded in 1999 by former Heartstream CEO Alan Levy under the name Vertis Neuroscience, Northstar attracted big bucks from Johnson & Johnson Development Corp., AEA Investors, Mayfield Fund, Canaan Partners, Domain Associates and others.

It went public in May 2006, pricing at $15 per share. Shares traded today at $1.75, up 36 percent on the day.

Here's more from the company's statement today, which indicates most of the staff will be laid off.

Northstar Neuroscience, Inc., (Nasdaq:NSTR), a medical device company developing therapies for the treatment of major depressive disorder, today announced that its Board of Directors has determined, in its best business judgment after consideration of potential strategic alternatives, that it is in the best interests of the Company and its shareholders to liquidate the Company's assets and to dissolve the Company. The Company's Board of Directors has approved a Plan of Complete Liquidation and Dissolution of the Company (the "Plan"), subject to shareholder approval. The Company intends to hold a special meeting of shareholders to seek approval of the Plan and will file related proxy materials with the Securities and Exchange Commission ("SEC") in the near future. Prior to the special meeting the Company will reduce its headcount to a limited number of employees who will assist in the termination of operations.

The Plan contemplates an orderly wind down of the Company's business and operations. If the Company's shareholders approve the Plan, the Company intends to file articles of dissolution, satisfy or resolve its remaining liabilities and obligations, including but not limited to contingent liabilities and claims, ongoing clinical trial obligations, lease obligations, severance for terminated employees, and costs associated with the liquidation and dissolution, and make distributions to its shareholders of cash available for distribution, subject to applicable legal requirements. Following shareholder approval of the Plan and the filing of articles of dissolution, the Company would delist its common stock from NASDAQ.