Northstar Neuroscience Responds to Unsolicited Proposal from Tang Capital Partners

SEATTLE--(BUSINESS WIRE)--Northstar Neuroscience, Inc., (NASDAQ: NSTR), a medical device company developing therapies for the treatment of neurological diseases and disorders, announced today that its Board of Directors has reviewed the proposal from Tang Capital Partners to enter into negotiations to acquire Northstar for $2.25 per share and concluded that the proposal is not in the best interests of all shareholders. Management and the Board of Directors will continue to work with the Companys financial advisor, Leerink Swann, to evaluate strategic alternatives.

Below is a copy of the response provided to Tang Capital Partners.

July 8, 2008

Tang Capital Partners, LP
4401 Eastgate Mall
San Diego, CA 92121
Attention: Kevin C. Tang

Dear Mr. Tang:

Thank you for your letter of July 2, 2008. We appreciate your continued interest in Northstar Neuroscience and your goal of enhancing shareholder value. It is a goal that the Companys Board of Directors and management team share.

The Board of Directors has deliberately and thoughtfully considered your letter and has discussed the proposal with our advisors, including our financial advisor, Leerink Swann. After careful consideration, the Board has concluded that your proposal is not in the best interests of all shareholders. Northstar has been, and will continue to be, responsive to all of its shareholders, including you. The Company will continue to work with Leerink Swann to consider strategic alternatives.

Sincerely,

John Bowers   Alan Levy
President and Chief Executive Officer Chairman, Board of Directors
Northstar Neuroscience, Inc. Northstar Neuroscience, Inc.

cc: Board of Directors of Northstar Neuroscience, Inc.

About Northstar Neuroscience

Northstar Neuroscience is a medical device company focused on developing neuromodulation therapies to treat neurological injury, disorder, and disease. Northstar's proprietary Renova Cortical Stimulation System is an investigational device that delivers targeted electrical stimulation to the outer surface of the brain - the cerebral cortex. The Renova system is currently under investigation for several indications. For more information, visit www.northstarneuro.com.

This release contains information about management's view of our future expectations, plans and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of a variety of factors including, but not limited to, risks and uncertainties associated with the timing and results of any of our clinical trials, analysis of the results of any of our clinical trials, our ability to complete our ongoing or any future clinical trials, delays in conducting or completing any of our clinical trials, and our ability to estimate future cash flows and cash needs. Results from our feasibility trials, or from subgroups of a pivotal clinical trial, may not be indicative of success in any later clinical trials. In addition, although we are evaluating strategic alternatives, there can be no assurance that we will pursue any such alternative.

Contacts


Investors:
Northstar Neuroscience, Inc.
Ray Calvert, 206-902-1930
Vice President, Finance/CFO
ir@northstarneuro.com
or
Westwicke Partners
Mark Klausner, 410-321-9651
mark.klausner@westwickepartners.com
or
Media:
Schwartz Communications
Helen Shik, 781-684-0770
northstar@schwartz-pr.com

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