-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TF7jF449K7dI4fB0MUXYYfm5NorIzqmHiG255gdlpbBznYgPRdVyoWMXABeH2VtA dBVOZv65Q2BwgJwm0JYyMQ== 0001144204-08-069328.txt : 20081215 0001144204-08-069328.hdr.sgml : 20081215 20081215150734 ACCESSION NUMBER: 0001144204-08-069328 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20081215 DATE AS OF CHANGE: 20081215 GROUP MEMBERS: PETER KOLCHINSKY GROUP MEMBERS: RA CAPITAL HEALTHCARE FUND II, L.P. GROUP MEMBERS: RA CAPITAL HEALTHCARE FUND, L.P. GROUP MEMBERS: RICHARD H. ALDRICH SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: Northstar Neuroscience, Inc. CENTRAL INDEX KEY: 0001351509 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 911976637 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-82247 FILM NUMBER: 081249575 BUSINESS ADDRESS: STREET 1: 2401 FOURTH AVENUE STREET 2: SUITE 300 CITY: SEATTLE STATE: WA ZIP: 98121 BUSINESS PHONE: (206) 728-1477 MAIL ADDRESS: STREET 1: 2401 FOURTH AVENUE STREET 2: SUITE 300 CITY: SEATTLE STATE: WA ZIP: 98121 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: RA CAPITAL MANAGEMENT, LLC CENTRAL INDEX KEY: 0001346824 IRS NUMBER: 830406777 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 111 HUNTINGTON AVE, SUITE 610 CITY: BOSTON STATE: MA ZIP: 02199 BUSINESS PHONE: 617-778-2512 MAIL ADDRESS: STREET 1: 111 HUNTINGTON AVE, SUITE 610 CITY: BOSTON STATE: MA ZIP: 02199 SC 13D/A 1 v134780_sc13da.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D/A

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO §240.13D-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO §240.13d-2(a)

(Amendment No. 1)*

Northstar Neuroscience, Inc.

(Name of Issuer)

Common Stock, par value $0.001 per share

(Title of Class of Securities)

66704V101

(CUSIP Number)

Peter Kolchinsky

RA Capital Management, LLC

800 Boylston Street, Suite 1500

Boston, MA 02199

(Name, Address and Telephone Number of Person

Authorized to Receive Notices and Communications)

December 15, 2008

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 66704V101

1.	Names of Reporting Persons.
	RA Capital Management, LLC
2.	Check the Appropriate Box if a Member of a Group
						(a) o (b) o
3.	SEC Use Only
4.	Source of Funds			WC
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)								o
6.	Citizenship or Place of Organization				Massachusetts
Number of Shares Beneficially Owned by Each Reporting Person With		7.	Sole Voting Power				2,539,139
		8.	Shared Voting Power				0
		9.	Sole Dispositive Power				2,539,139
		10.	Shared Dispositive Power				0
11.	Aggregate Amount Beneficially Owned by Each Reporting Person						2,539,139
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares									o
13.	Percent of Class Represented by Amount in Row (11)							9.71%
14.	Type of Reporting Person (See Instructions)						IA

CUSIP No. 66704V101

1.	Names of Reporting Persons.
	Richard H. Aldrich
2.	Check the Appropriate Box if a Member of a Group
						(a) o (b) o
3.	SEC Use Only
4.	Source of Funds			OO
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)								o
6.	Citizenship or Place of Organization				United States
Number of Shares Beneficially Owned by Each Reporting Person With		7.	Sole Voting Power				0
		8.	Shared Voting Power				0
		9.	Sole Dispositive Power				0
		10.	Shared Dispositive Power				0
11.	Aggregate Amount Beneficially Owned by Each Reporting Person						0
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares									o
13.	Percent of Class Represented by Amount in Row (11)							0%
14.	Type of Reporting Person (See Instructions)						IN

CUSIP No. 66704V101

1.	Names of Reporting Persons.
	Peter Kolchinsky
2.	Check the Appropriate Box if a Member of a Group
						(a) o (b) o
3.	SEC Use Only
4.	Source of Funds			OO
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)								o
6.	Citizenship or Place of Organization				United States
Number of Shares Beneficially Owned by Each Reporting Person With		7.	Sole Voting Power				0
		8.	Shared Voting Power				2,539,139
		9.	Sole Dispositive Power				0
		10.	Shared Dispositive Power				2,539,139
11.	Aggregate Amount Beneficially Owned by Each Reporting Person						2,539139
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares									o
13.	Percent of Class Represented by Amount in Row (11)							9.71%
14.	Type of Reporting Person (See Instructions)						IN

CUSIP No. 66704V101

1.	Names of Reporting Persons.
	RA Capital Healthcare Fund, L.P.
2.	Check the Appropriate Box if a Member of a Group
						(a) o (b) o
3.	SEC Use Only
4.	Source of Funds			WC
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)								o
6.	Citizenship or Place of Organization				Delaware
Number of Shares Beneficially Owned by Each Reporting Person With		7.	Sole Voting Power				2,507,847
		8.	Shared Voting Power				0
		9.	Sole Dispositive Power				2,507,847
		10.	Shared Dispositive Power				0
11.	Aggregate Amount Beneficially Owned by Each Reporting Person						2,507,847
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares									o
13.	Percent of Class Represented by Amount in Row (11)							9.59%
14.	Type of Reporting Person (See Instructions)						PN

CUSIP No. 66704V101

1.	Names of Reporting Persons.
	RA Capital Healthcare Fund II, L.P.
2.	Check the Appropriate Box if a Member of a Group
						(a) o (b) o
3.	SEC Use Only
4.	Source of Funds			WC
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)								o
6.	Citizenship or Place of Organization				Delaware
Number of Shares Beneficially Owned by Each Reporting Person With		7.	Sole Voting Power				31,292
		8.	Shared Voting Power				0
		9.	Sole Dispositive Power				31,292
		10.	Shared Dispositive Power				0
11.	Aggregate Amount Beneficially Owned by Each Reporting Person						31,292
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares									o
13.	Percent of Class Represented by Amount in Row (11)							0.12%
14.	Type of Reporting Person (See Instructions)						PN

Explanatory Note.

This Amendment No. 1 relates to and amends the Schedule 13D of Richard H. Aldrich, Peter Kolchinsky, RA Capital Management, LLC, RA Capital Healthcare Fund, L.P. (f/k/a RA Capital Biotech Fund, L.P.) and RA Capital Healthcare Fund II, L.P. (f/k/a RA Capital Biotech Fund II, L.P.), initially filed jointly by the Reporting Persons with the Securities and Exchange Commission on July 14, 2008 (the “Schedule 13D Statement”), with respect to the Common Stock, $0.001 par value (the “Common Stock”), of Northstar Neuroscience, Inc., a Washington corporation (the “Issuer”). Mr. Kolchinsky is the manager of RA Capital Management, LLC (“Capital”), which is the sole general partner of each of RA Capital Healthcare Fund, L.P. (“Fund I”) and RA Capital Healthcare Fund II, L.P. ( “Fund II”). Mr. Aldrich ceased being a manager of RA Capital Management, LLC on December 12, 2008. All capitalized terms used and not expressly defined herein have the respective meanings ascribed to such terms in the Schedule 13D Statement.

The Reporting Persons sent a letter to the Issuer’s board of directors on December 15, 2008, a copy of which is filed as Exhibit 3 to this Schedule 13D, and which is incorporated herein by reference. During October 2008 and November 2008, the Reporting Persons also purchased an additional 29,539 shares of the Issuer’s common stock.

Items 3, 4, 5 and 7 of the Schedule 13D Statement are hereby amended to the extent hereinafter expressly set forth.

Item 3. Source and Amount of Funds or Other Consideration

The Reporting Persons expended an aggregate of approximately $37,918 to purchase the 29,539 shares of the Issuer’s common stock during October 2008 and November 2008. Such transactions were effected in open market purchases and acquired in the ordinary course of business. Mr. Kolchinsky acquired his interest in the shares of the Issuer’s common stock through his ownership in Capital, Fund I and Fund II. Other than the transactions listed in Item 5(c) below, the Reporting Persons’ only other transactions in the Issuer’s common stock are included in the Schedule 13D Statement.

The Reporting Persons used its own funds for the purchases, none of which were borrowed or otherwise obtained from any other source.

Item 4. Purpose of Transaction

On December 15, 2008, the Reporting Persons sent to the Board of Directors of the Issuer a letter (the “Letter”) proposing that the Issuer consider making a distribution or dividend to the Issuer’s stockholders or implementing a share buy-back program as soon as possible, preferably before year end. A copy of the Letter is filed as Exhibit 3 to this Amendment No. 1 to Schedule 13D and is incorporated herein in its entirety by reference. On December 15, 2008, the Reporting Persons issued a press releasing announcing the Letter.

No assurances can be given that any of the proposals outlined in the Letter will be implemented or consummated.

Regardless whether or not the Issuer decides to implement any of the proposals set forth in the Letter, the Reporting Persons from time to time intend to review their investment in the Issuer on the basis of various factors, including the Issuer’s business, financial condition, results of operations and prospects, general economic and industry conditions, the securities markets in general and those for the Issuer’s shares of common stock in particular, as well as other developments and other investment opportunities. Based upon such review, the Reporting Persons will take such actions in the future as the Reporting Persons may deem appropriate in light of the circumstances existing from time to time. If the Reporting Persons believe that further investment in the Issuer is attractive, whether because of the market price of the Issuer's Shares or otherwise, they may acquire shares of common stock or other securities of the Issuer either in the open market or in privately negotiated transactions. Similarly, depending on market and other factors, the Reporting Persons may determine to dispose of some or all of the Shares currently owned by the Reporting Persons or otherwise acquired by the Reporting Persons either in the open market or in privately negotiated transactions. In addition, the Reporting Person may in the future make additional proposals to the Issuer relating to, or that could result in, a change of control transaction, an extraordinary transaction, or change of the present Board of Directors or management of the Issuer.

Item 5. Interest in Securities of the Issuer

(a)	Amount beneficially owned and percentage of class:

	RA Capital Management, LLC	2,539,139 shares, representing 9.71% of the class
	Richard H. Aldrich	0 shares, representing 0% of the class
	Peter Kolchinsky	2,539,139 shares, representing 9.71% of the class
	RA Capital Healthcare Fund, L.P.	2,507,847 shares, representing 9.59% of the class
	RA Capital Healthcare Fund II, L.P.	31,292 shares, representing 0.12% of the class

(b)	Voting and disposition powers:

	Sole power to vote or direct the vote:

	RA Capital Management, LLC	2,539,139 shares, representing 9.71% of the class
	Richard H. Aldrich	0 shares
	Peter Kolchinsky	0 shares
	RA Capital Healthcare Fund, L.P.	2,507,847 shares, representing 9.59% of the class
	RA Capital Healthcare Fund II, L.P.	31,292 shares, representing 0.12% of the class

	Shared power to vote or direct the vote:

	RA Capital Management, LLC	0 shares
	Richard H. Aldrich	0 shares, representing 0% of the class
	Peter Kolchinsky	2,539,139 shares, representing 9.71% of the class
	RA Capital Healthcare Fund, L.P.	0 shares
	RA Capital Healthcare Fund II, L.P.	0 shares

	Sole power to dispose or direct the disposition:

	RA Capital Management, LLC	2,539,139 shares, representing 9.71% of the class
	Richard H. Aldrich	0 shares
	Peter Kolchinsky	0 shares
	RA Capital Healthcare Fund, L.P.	2,507,847 shares, representing 9.59% of the class
	RA Capital Healthcare Fund II, L.P.	31,292 shares, representing 0.12% of the class

	Shared power to dispose or direct the disposition:

	RA Capital Management, LLC	0 shares
	Richard H. Aldrich	0 shares, representing 0% of the class
	Peter Kolchinsky	2,539,139 shares, representing 9.61% of the class
	RA Capital Healthcare Fund, L.P.	0 shares
	RA Capital Healthcare Fund II, L.P.	0 shares

(c)	The Reporting Persons have engaged in the following transactions in the Issuer’s common stock during the last 60 days:

Entity	Transaction	Trade Date	Shares	Price/Share
RA Capital Healthcare Fund, L.P.	Open market purchase	October 8, 2008	316	$1.45
RA Capital Healthcare Fund II, L.P	Open market purchase	October 8, 2008	20,123	$1.45
RA Capital Healthcare Fund, L.P.	Open market purchase	November 24, 2008	68	$0.91
RA Capital Healthcare Fund II, L.P.	Open market purchase	November 24, 2008	9,032	$0.91

(d)

N/A

(e)

On December 12, 2008, Mr. Aldrich ceased being a manager of Capital, and ceased to beneficially own the securities of the Issuer held by Fund I and Fund II. As a result, Mr. Aldrich ceased being the beneficial owner of more than 5% of the Issuer’s common stock.

Item 7. Material to Be Filed as Exhibits

Exhibit 1	--	Joint Filing Agreement, dated July 14, 2008, among RA Capital Management, LLC, Richard H. Aldrich, Peter Kolchinsky, RA Capital Healthcare Fund, L.P. (f/k/a RA Capital Biotech Fund, L.P.), RA Capital Healthcare Fund II, L.P. (f/k/a RA Capital Biotech Fund II, L.P.) (incorporated by reference to the Schedule 13D filed by the Reporting Persons on July 14, 2008)
Exhibit 2	--	Letter to the Board of Directors of the Issuer, dated July 14, 2008 (incorporated by reference to the Schedule 13D filed by the Reporting Persons on July 14, 2008)
Exhibit 3	--	Letter to the Board of Director of the Issuer, dated December 15, 2008

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.


		DATE: December 15, 2008

		RA CAPITAL HEALTHCARE FUND, L.P.

		By:		RA Capital Management, LLC
				General Partner

		By:		/s/ Peter Kolchinsky

		Peter Kolchinsky
		Manager

		RA CAPITAL HEALTHCARE FUND II, L.P.

		By:		RA Capital Management, LLC
				General Partner

		By:		/s/ Peter Kolchinsky

		Peter Kolchinsky
		Manager

		RA CAPITAL MANAGEMENT, LLC

		By:		/s/ Peter Kolchinsky

		Peter Kolchinsky
		Manager

		RICHARD H. ALDRICH

		/s/ Richard H. Aldrich


		PETER KOLCHINSKY

		/s/ Peter Kolchinsky

EX-99.3 2 v134780_ex99-3.htm

EXHIBIT 3

RA Capital Management, LLC

800 Boylston Street, Suite 1500

Boston, MA 02199

December 15, 2008

Board of Directors

c/o Alan Levy, Ph.D., Chairman of the Board

Northstar Neuroscience, Inc.

2401 Fourth Avenue, Suite 300

Seattle, Washington 98121

Dear Members of the Board of Directors:

We continue to be shocked and frustrated by the complete lack of response from Northstar Neuroscience, Inc. (the “Company” or “Northstar”) to the several options it has to preserve and return value to its stockholders. As you know, we sent a letter to each of you on July 14, 2008, in which we outlined a reasonably detailed proposal on how the Company could stop its hemorrhaging of cash, provide a distribution to its stockholders, and sell its remaining assets for as much value as possible. 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. Although you have refused to return capital to shareholders, you have put forth no viable business plan for the Company. 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.

While we acknowledge that you have recently taken some steps to reduce expenses, we reiterate that now is not the time for half-measures. Your reduction of expenses slows value destruction but does not permit the recovery of shareholder value reflected in the Company’s cash balance. If your strategy is to arrange for a white knight to acquire the Company at a premium to cash, that is not a strategy but more like hope and a prayer given the current economic environment and market circumstances. The credit crisis and market collapse we have witnessed since July have made investors and companies much less willing to pay for all but the most valued of strategic assets. The Company’s failed programs hardly qualify as strategic assets; in fact, the market has clearly assigned them a negative enterprise value (approximately -$1.40/share, which offsets $2.40/share in cash to yield the current $1.00/share for the stock). The only asset of value that the Company possesses is its cash; this asset should not be wasted and ought to be returned to shareholders as soon as possible that they might invest it more profitably.

Our July 14, 2008 letter speaks for itself and your silence, inaction, and inability to offer any other options are increasingly alarming. Any options you might have thought you had in July have since disappeared. We also want to make clear that any attempt by you to merge or otherwise combine with any other public or private company, thereby inflating the enterprise value of the combined entity without increasing the share price for your existing stockholders, would further erode any potential value in Northstar shares that could be realized through a cash dividend or share buyback. If a merger or acquisition of another company or asset were put to a stockholder vote, we would vote against such a proposal and believe that other stockholders would likely prefer to have their capital returned to them.

We again urge you to make a distribution or dividend to your stockholders as soon as possible, preferably announcing your intention to do so prior to the end of the year. We believe that most investors have realized losses this year and that a large cash dividend would likely not have significant tax consequences for most investors. Alternatively, we urge you to craft and implement a share buy-back program, which would also have the effect of raising the share price and allowing stockholders the opportunity to salvage some of the value of their investment, possibly more tax efficiently than via a dividend. If you indeed feel that the long term prospects for the Company are good, then buy-out any stockholders who do not share your same view. Again, we expect you to take prompt action, including making a decision on these matters prior to the end of the year.

If you do not wish to take any of the actions outlined above because you have doubts about whether doing so is in the best interests of the stockholders, then we urge you to call a Special Meeting of the stockholders and simply ask your stockholders directly. After all, you owe fiduciary duties to your stockholders and they continue to see the value of their investment decline in the face of your inaction.

Alan J. Levy, you are the Chairman of the Board of Directors and therefore hold a leadership position alongside John S. Bowers, Jr., making you particularly responsible for the direction of this company. However, we also specifically recognize the role that each of the members of the board play. Susan K. Barnes, you have a responsibility to speak out against the waste of shareholder capital. Michael Ellwein, your position with Three Arch and history at Medtronic would suggest that you have not always made a career of value destruction, so we can hardly imagine that you are comfortable letting it happen at Northstar, and yet the situation continues to deteriorate. Albert J. Graf, you must be frustrated about the lack of any results from the Company’s management, and yet have you done all that you can to protect shareholders from management’s poor judgment? Robert E. McNamara, as a career CFO who ought to have an appreciation for fiscal responsibility, you are permitting Northstar’s disrespect for its shareholder’s capital to continue to the detriment of your professional reputation. Dale A. Spencer, you have had a long relationship with the Company, since 1999, but you are also a private investor, and we have to believe that some part of you is disgusted by the idea of Northstar management continuing to collect generous salaries while running an enterprise that the market has valued well below zero for nearly a year. Carol D. Winslow, what should the investors whose capital you manage at Channel Medical Partners LP conclude about your acumen and values as a business person if you continue to sit passively by while Northstar’s management transfers the wealth of its investors into the bank accounts of its executives without creating any positive equity value whatsoever? How long will each of you allow this to continue? We urge you to immediately solve this problem once and for all.

We recognize that shareholders of the Company have little influence; you have the safety of a staggered board and Washington state laws of incorporation, which make a travesty of corporate governance and fiduciary duty. Shareholders can only hope that you have the decency to give them a chance to express their wishes to you formally if you will not take immediate action to protect the value of their investment in the Company through a dividend or share buyback. While you certainly have challenged our notion that boards represent the interests of the shareholders, we remain optimistic that, with some persistence, shareholders can prevail on even the most intransigent management and board to listen to their concerns and protect their investment or personally pay back shareholders for what, in our opinion, is a gross dereliction of fiduciary duty.

Unless we hear from you by Friday, December 19, 2008, that you intend either to take the actions urged above or call a Special Meeting of the stockholders as urged above, then we intend to submit and vigorously pursue shareholder proposals for your next annual meeting. These proposals will, among other things, seek input from your stockholders on the issue of a distribution or dividend and/or share buy-back program and will put forth a slate of new candidates to be elected to your board of directors at that meeting.

We intend to pursue our interests here aggressively, both for our benefit and hopefully for the benefit of all stockholders, including preserving our right to take legal action against you and the Company.

Sincerely,

RA Capital Healthcare Fund, L.P.

By: RA Capital Management, LLC, its general partner

/s/ Peter Kolchinsky

Peter Kolchinsky

Managing Member

-----END PRIVACY-ENHANCED MESSAGE-----