A leading Northstar Neuroscience investor urged the company to quickly sell itself or liquidate its assets.

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Northstar Neuroscience may be worth more dead than alive, a top shareholder says.

On Monday, RA Capital urged the Seattle medical-device firm to sell itself or split its sizable cash hoard among shareholders. In the meantime, it said in a letter to Northstar’s board, the company should eliminate most employees to conserve cash.

Through a spokeswoman, Northstar declined to comment on the letter.

Northstar’s value plummeted after its lead therapy — which sought to stimulate the brain to improve motion in stroke survivors — failed in a clinical trial in January.

Now the company’s cash stash — $73 million as of March 31 — is bigger than its market capitalization of $49 million.

In early July, San Diego-based Tang Capital Partners, another major shareholder, proposed to buy the company in an offer that valued it at $58 million. Northstar rebuffed the offer, saying it was not in the best interest of all its shareholders.

The failure of its lead clinical trial led Northstar to lay off a third of its work force and to shift its focus toward developing a therapy for depression.

“Our objective is to gain sufficient clinical data by the end of next year to validate one or more of our therapies,” said Chief Executive John Bowers during a conference call in April.

But RA Capital doesn’t want to wait that long. In its letter, the fund suggested Northstar cease all operations and lay off most of its employees to preserve its cash while it finds a buyer.

Northstar also should resume discussions with Tang Capital, the letter said. If the company does not find a buyer, it could liquidate itself.

“This would clearly be in the best interest of the stockholders of the company in light of the prices at which the company’s stock has been trading since January 2008,” said the letter. “Now is not the time for half-measures,” it added.

RA Capital owns about 2.5 million Northstar shares, about 9.6 percent of the outstanding stock.

Northstar had 58 employees at the end of the first quarter in March.

Biotech companies have to carry large amounts of cash to pay for expensive clinical trials. So it’s “not unusual” for these firms to find themselves with more money in the bank than what investors think they’re worth, especially after a market slump or a disappointing medical trial, said David Miller, president of Seattle-based Biotech Stock Research.

“When we hit the bottom of the market in 2002, we had a lot of companies trading for less than their cash,” he said.

Northstar shares closed up a penny Monday, to $1.89.

Ángel González: 206-515-5644 or agonzalez@seattletimes.com