A Medical Device Daily

Northstar Neuroscience (Seattle), which suffered a huge setback when its technology for treating stroke patients failed a clinical trial last January, said Monday that it plans to lay off most of its remaining employees and seek shareholder permission to liquidate the company.

The company has been pressed for months by a major shareholder, investment firm RA Capital, to distribute its accumulated cash or sell its assets. Northstar had cash and investments worth more than $68 million as of September 30, according to its latest quarterly report.

In a harshly worded letter in mid-December, RA Capital told the company's directors that "We continue to be shocked and frustrated by the complete lack of response from Northstar Neuroscience Inc. to the several options it has to preserve and return value to its stockholders. Since July, the company's stock, which was then trading at an astonishing 30% discount to its cash balance per share, has fallen by nearly 50% and continues to trade at an even more appalling 60% discount from its cash balance per share."

Even more sharply, RA Capital told the board: "It would seem that some of you remain content to pay yourselves salaries from cash that belongs to stockholders while contributing nothing of any positive value in return."

Monday's statement from Northstar said its board had concluded that "in its best business judgment after consideration of potential strategic alternatives," the best course of action for Northstar and its shareholders is "to liquidate the company's assets and to dissolve the company."

The company said it 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 shortly.

In October, Northstar said the FDA has granted conditional approval of a second clinical study of its Renova cortical stimulation system for the treatment of major depressive disorder. With that approval, the company said it expected to begin enrolling patients into its PROSPECT II study during that quarter, with preliminary results anticipated during the second half of 2009.

The approval came less than three months after Northstar said it would move away from stroke rehabilitation therapy and instead focus on its cortical stimulation for depression, putting all other clinical programs on hold (Medical Device Daily, Aug. 4, 2008).

"Major depressive disorder affects millions of people who are not adequately treated today and who suffer greatly. Targeted stimulation of the cerebral cortex has shown promise in relieving depressive symptoms where drugs and other therapies have not been effective," said John Bowers, president/CEO of Northstar, said at the time. "This is an important milestone for our depression program, and we are excited to move forward with our clinical collaborators to begin study enrollment."

Northstar, which had about 38 employees this summer after two earlier rounds of layoffs, said that prior to the vote, "the company will reduce its headcount to a limited number of employees who will assist in the termination of operations."

If shareholders approve the plan, the company said it intends to conduct an "orderly wind-down" of its business, including satisfying or resolving its remaining liabilities and obligations, such as ongoing clinical trial obligations, lease obligations, severance for terminated employees, and costs associated with the liquidation and dissolution, and then to make distributions to its shareholders of cash available for distribution.

In other restructuring news:

• Vasogen (Mississauga, Ontario) reported that pursuant to a previously reported restructuring plan, it has been reviewing strategic alternatives for the purpose of enhancing shareholder value. This process has included screening, reviewing, and short-listing potential opportunities including the sale of the company, a merger or acquisition, and exploring the monetization of certain tangible and intangible assets. The company said the process has also included a review of the potential out-licensing of assets, asset divestiture, or liquidation of the company.

The company reported that during this process it has completed a number of initiatives to significantly reduce its base cash burn rate and conserve cash and completed its fiscal year end with more than $8.5 million in cash resources.

"While the strategic review process has taken longer than hoped, we continue to be intensely focused on bringing this process to a close," said Chris Waddick, president/CEO of Vasogen. "Based on our current status, we anticipate being in a position to provide a further update to shareholders before the end of January."

• BrainLAB (Feldkirchen, Germany), a provider of software-driven systems for targeted, less-invasive medical treatments, reported a new, customer-focused sales and support structured Surgery Business in consideration, it said, of continued growth and an expanding product portfolio.

By integrating field sales and support structures, the company said that customers will benefit from a more efficient and customer focused organization. Streamlined responsibilities, communication, reporting structures will enhance the customer experience.

BrainLAB area account managers will become responsible for all products of the BrainLAB surgical portfolio and will be best positioned to serve the clinical needs of their customers. More focused regional teams will demonstrate improved expertise throughout the consultative sales process and beyond.

Cameron Georges, formerly sales director BrainSUITE, and Paolo Jelmoni, formerly marketing director have become directors in the new structure.

"BrainLAB is proactively addressing the medical industry's need for a higher level of personalization and consistency," said Sean Clark, president of BrainLAB's North American subsidiary. "The new structure allows our representatives to further develop strong customer relationships, while meeting the unique demands of each hospital and teaching institution."

BrainLAB develops software-driven medical technology that enables procedures that are more precise, less invasive, and also less expensive than traditional treatments. Among the core products are image-guided systems that provide highly accurate real-time information used for navigation during surgical procedures. This utility has been further expanded to serve as a computer terminal for physicians to more effectively access and interpret diagnostic scans and other digital medical information for better informed decisions. BrainLAB solutions allow expansion from a single system to operating suites to digitally integrated hospitals covering all subspecialties from neurosurgery, orthopedics, ENT, CMF to spine & trauma and oncology. With 3300 systems installed in over 75 countries, BrainLAB is a market leader in image-guided technology.

The privately held BrainLAB group, founded in 1989, is headquartered in the Munich area, and today employs 1,000 in 16 offices across Europe, Asia, Australia, North and South America.