Most IPOs of start-up medical device companies struggle in their first publicly traded day. The debut performance of Northstar Neuroscience (NASDAQ:NSTR), however, was an exception.

Despite last week's weak IPO market, shares of the Seattle-based company surged 18% and ultimately closed up 11% on Friday, following its debut led by Citigroup and Cowen. The company sold 7.1 million shares, over one million more than expected, at $15 per share. The $106.5 million generated will be used for research and general corporate purposes.

So what's guiding investors toward Northstar? In 2006, the annual health-care burden of stroke-related care in the U.S. is projected to exceed $57.9 billion. The company claims that its initial product, the Northstar Stroke Recovery System, could improve the quality of lives of stroke survivors. More than 5.5 million individuals in this country survive a stroke, approximately half of whom suffer from hand and arm motor impairment, for which few effective therapies exist.

By delivering electrical stimulation to the brain's cortex, the company believes that it can enhance recovery of hand and arm motor function. The device would be implanted in the cortex during a surgical procedure estimated to take about two-and-a-half hours, which is much less than most neurosurgeries. Two clinical feasibility studies have led the company to believe that the product could benefit even patients who do not undergo the procedure until several years after their strokes. Two additional FDA-approved studies have been initiated to support the initial data. The company is also examining uses of the device to treat other neurological disorders and for stroke-related speech loss.

As exciting as the technology appears, Fools should not rush in at this stage. As is the case with developmental companies, Northstar isn't generating revenue and actually lost almost $15 million last year. Regulatory hurdles also remain, as the FDA has not yet signed off on the device, and reimbursement rates would have to make its usage commercially viable.

Analyzing this developmental stage company will pose serious challenges for investors. There does seem to be a significant, unmet need in the population for its technology, but there's uncertainty concerning when the device will receive FDA approval. If granted approval in November 2008, the company projects that it would begin generating revenue in 2009.

For now, I'd recommend keeping Northstar on your horizon.

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Fool contributor S.J. Caplan has never located the North Star. Most of the time, she can't find her keys, either. She does not own shares in the company. The Fool has a disclosure policy .