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Shareholder urges Northstar Neuroscience to slow cash burn, reconsider offer from Tang Capital
By Lisa Kerner
Charlotte, N.C., July 14 - RA Capital Biotech Fund, LP urged Northstar Neuroscience, Inc. to immediately reduce operating expenses and either find a buyer or make a cash distribution.
In a July 14 letter to Northstar's board of directors, RA Capital questioned the company's recent rejection of the $2.25-per-share offer from Tang Capital Partners, LP.
RA Capital urged Northstar to re-engage discussions with Tang Capital or explore a better third-party offer.
"At a minimum we would have expected that the board would have entertained negotiations with Tang Capital concerning its offer in an effort to reach agreement on a transaction that would have been mutually satisfactory and in the best interests of all stockholders of the company," the letter said.
It was previously reported that the offer from Tang Capital, an 18% shareholder, was not subject to any financing condition.
According to RA Capital, Northstar is "burning cash at an alarming rate." The shareholder estimates the cash burn rate over the next 12 months will be roughly $0.80 per share or more.
RA Capital suggested that Northstar cease substantially all of its operations and lay off most of its employees to slow the cash burn rate.
Northstar was also urged to sublease its current facilities in Seattle.
If Northstar takes appropriate steps, RA Capital estimates that net cash of about $2.40 per share or more could be preserved.
RA Capital also suggested that Northstar's board consider paying a cash distribution to its stockholders of approximately $2.40 per share immediately and retain about $8 million to cover all of its ongoing expenses.
Northstar, a Seattle-based medical device company, had announced it would evaluate strategic alternatives with the assistance of Leerink Swann.
RA Capital owns about 2.5 million shares of Northstar.
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