StemCells, Inc. Reports Fourth Quarter and Full Year 2012 Financial Results and Provides Business Update

StemCells, Inc. Reports Fourth Quarter and Full Year 2012 Financial Results
and Provides Business Update

NEWARK, Calif., March 19, 2013 (GLOBE NEWSWIRE) -- StemCells, Inc.
(Nasdaq:STEM), a leading stem cell company developing and commercializing
novel cell-based therapeutics and tools for use in stem cell-based research
and drug discovery, today provided a business update and reported financial
results for the fourth quarter and year ended December 31, 2012.

"2012 was an eventful and positive year for StemCells, Inc.," said Martin
McGlynn, President and CEO of StemCells, Inc. "We published a broad array of
meaningful preclinical and clinical data demonstrating the therapeutic
potential of our proprietary HuCNS-SC® cells to address a wide range of CNS
indications, and continue to make progress in all our programs. The year began
with the publication of the preclinical data underlying our clinical trial for
dry age-related macular degeneration (AMD), and late in the year we published
two papers demonstrating the potential applicability of our cells for a range
of myelination disorders, including the data from our Phase I clinical trial
in Pelizaeus-Merzbacher disease (PMD) showing evidence of new myelination and
measurable gains in neurological function.In between those publications, we
reported interim six-month data from our spinal cord injury trial showing
considerable gains in sensory function in two of three patients, and last
month we followed that up by reporting the 12 month data, which showed that
the gains had persisted and that one patient had converted from a complete
injury to an incomplete injury.Lastly, we also announced exciting
preclinical data in two animal models relevant to Alzheimer's disease.

"Last summer, the California Institute for Regenerative Medicine (CIRM)
approved our disease team application for up to $20 million for IND-enabling
activities for cervical spinal cord injury. The funding would have been in
the form of a loan, but we have elected not to borrow these funds from CIRM.
We remain committed to pursuing the development of our human neural stem
cells for traumatic spinal cord injury, particularly in light of the
encouraging data we recently announced from the first patient cohort, who have
now completed the Phase I/II study underway in Switzerland. Separately, we
remain in active discussion with CIRM concerning the terms and conditions that
might apply for a loan to help fund preclinical and IND-enabling activities
for Alzheimer's disease."

2012 and Recent Business Highlights

Therapeutic Product Development

  *In January 2012, we published preclinical data demonstrating that our
    HuCNS-SC cells protect host photoreceptors and preserve vision in a
    well-established animal model of retinal disease. Moreover, the number of
    cone photoreceptors, which are responsible for central vision, remained
    constant over an extended period. In humans, degeneration of the cone
    photoreceptors accounts for the unique pattern of vision loss in dry AMD.
    The data was featured as the cover article in the peer-reviewed European
    Journal of Neuroscience.

  *Also in January 2012, the Food and Drug Administration (FDA) authorized
    the initiation of a Phase I/II clinical trial of our HuCNS-SC cells in dry
    AMD. AMD is the leading cause of vision loss and blindness in people over
    55 years of age, and approximately 30million people worldwide are
    afflicted with the disease.Dry AMD is the most common form of AMD and
    there are no approved treatments for dry AMD.
    
  *In February 2012, the fourth and final patient in our Phase I PMD trial
    completed the twelve-month follow up and evaluations required by the trial
    protocol, and the trial was completed. The study was conducted at the
    University of California, San Francisco (UCSF).
    
  *In April 2012, we presented preliminary evidence of progressive and
    durable donor-cell derived myelination in all four patients who were
    transplanted with our HuCNS-SC cells in our Phase I clinical trial for
    PMD, a rare myelination disorder in children. In addition, clinical
    assessment revealed small but measureable gains in motor and/or cognitive
    function in three of the four patients; the fourth patient remained
    clinically stable. A summary of the trial results was presented at the
    2012 European Leukodystrophy Association (ELA) Families/Scientists Meeting
    in Paris.
    
  *In May 2012, we presented data from the first interim safety review of our
    Phase I/II spinal cord injury clinical trial, which indicated that the
    surgery, immunosuppression and the HuCNS-SC cell transplants were well
    tolerated. A summary of the data was presented at the Interdependence
    2012 Global SCI Conference in Vancouver, Canada.
    
  *In June 2012, we initiated our Phase I/II clinical trial of our HuCNS-SC
    cells in dry AMD. The trial is being conducted at the Retina Foundation of
    the Southwest (RFSW) in Dallas, Texas.We are currently exploring
    additional research centers as potential clinical trial sites for this
    study.
    
  *In July 2012, we presented preclinical data demonstrating that our
    proprietary human neural stem cells restored memory and enhanced synaptic
    function in two animal models relevant to Alzheimer's disease.
    Importantly, these results did not require reduction in beta amyloid or
    tau, substances that accumulate in the brains of patients with Alzheimer's
    disease and account for the pathological hallmarks of the disease. The
    data was presented at the Alzheimer's Association International Conference
    2012 in Vancouver, Canada.
    
  *In July 2012, CIRM approved an award to us for up to $20 million in the
    form of a forgivable loan under the Disease Team Therapy Development Award
    program (RFA 10-05) to fund IND-enabling activities for our HuCNS-SC cells
    for cervical spinal cord injury. However, we have elected not to borrow
    from CIRM under this program. 
    
  *Also in July 2012, the Japan Patent Office granted us Patent Number
    5007003 which broadly covers the prospective isolation and enrichment of
    neural stem and progenitor cells using antibody selection, as well as the
    use of these cells to treat disorders of the central nervous system. Some
    of the more noteworthy claims in this patent include methods for isolating
    human neural stem cells, as well as compositions of matter comprising
    enriched neural stem cells, such as our HuCNS-SC cells, and the use of
    enriched neural stem cells as a medicament for the treatment of
    neurodegenerative diseases, acute brain injury and dysfunction of the
    central nervous system.The term of this patent extends into 2020.
    
  *In September 2012, we presented interim six-month data from the first
    patient cohort in our Phase I/II clinical trial of our HuCNS-SC cells for
    chronic spinal cord injury. The first patient cohort all have no sensory
    or motor function below the level of injury and are considered to have
    complete spinal cord injuries. The interim data continued to demonstrate a
    favorable safety profile, and showed considerable gains in sensory
    function in two of the three patients compared to pre-transplant
    baselines; the third patient remained stable.The data was presented at
    the 51st Annual Scientific Meeting of the International Spinal Cord
    Society in London.
    
  *Also in September 2012, the first patient with an incomplete spinal cord
    injury was enrolled and dosed in our Phase I/II clinical trial in chronic
    spinal cord injury. Patients who retain some sensory function below the
    level of trauma are considered to have an incomplete injury.
    
  *Also in September 2012, CIRM approved a second award to us under RFA 10-05
    for up to $20 million in the form of a forgivable loan to fund
    IND-enabling activities for our HuCNS-SC cells for Alzheimer's disease.
    We remain in confidential negotiations with CIRM over the terms and
    conditions of this loan.
    
  *In October 2012, the first patient in our Phase I/II clinical trial in dry
    AMD was enrolled and dosed. 
    
  *In October 2012, two papers reporting clinical and preclinical data
    demonstrating the therapeutic potential of our HuCNS-SC cells for a range
    of myelination disorders were published in Science Translational Medicine,
    the peer-reviewed journal of the American Association for the Advancement
    of Science. The first paper summarized the data from our Phase I trial in
    PMD, which showed preliminary evidence of progressive and durable donor
    cell-derived myelination in all four patients transplanted with HuCNS-SC
    cells. Three of the four patients showed modest gains in neurological
    function; the fourth patient remained stable. The second paper
    demonstrated that transplantation of our human neural stem cells in an
    animal model of severe myelin deficiency resulted in new, functional
    myelin. Sophisticated analytical techniques were used to confirm that
    changes measured by magnetic resonance images were in fact derived from
    new human myelin generated by the transplanted HuCNS-SC cells and these
    results supported the use of similar techniques to detect and evaluate the
    degree of myelination in our Phase I PMD trial.
    
  *Also in October 2012, we were issued U.S. Patent Number 8,283,164 which
    broadly covers purified populations of human liver cells, including our
    human liver engrafting cells (hLEC).The hLEC cells were first isolated by
    our researchers in the late 1990s, and our scientists have repeatedly
    demonstrated the cells' engraftment and robust bioactivity in vivo and
    that they are expandable.While our hLEC cells are purified from donated
    adult livers not suitable for transplant, the newly issued '164 patent
    claims cells independent of tissue source, and therefore, has potential
    relevance to those deriving liver cells from induced pluripotent or
    embryonic stem cell platforms.The term of the '164 patent extends into
    2022.
    
  *In February 2013, we announced that the first patient cohort in our Phase
    I/II clinical trial for chronic spinal cord injury had completed the
    trial.The data from this first cohort at the 12- month assessment
    continued to demonstrate a favorable safety profile and showed that the
    considerable gains in sensory function observed at the six-month
    assessment in two of the three patients had persisted. The third patient
    remains stable.

Tools and Technologies Programs

  *In March 2012, we entered into a license agreement under which we granted
    genOway a worldwide, exclusive license to our Internal Ribosome Entry Site
    (IRES) technology for use in the development and commercialization of
    genetically engineered mice. We received an upfront license fee and could
    receive royalties on product sales.
    
  *In October 2012, we launched four new SC Proven® human neural stem cell
    kits for use in neuroscience research. Each kit contains high-purity,
    multipotent neural stem cells derived from a different area of the human
    central nervous system, and provides researchers with a reproducible and
    scalable serum-free platform with which to perform a broad range of
    assays. With these kits, researchers now have the ability to compare and
    contrast the biological, functional and neural differentiation properties
    of human neural stem cells isolated from specific regions of the central
    nervous system, as well as to screen for the effects of different
    compounds on such cells.
    
  *Also in October 2012, we partnered with a UK-based biomedical company to
    develop and commercialize a range of cell lines and reagents to facilitate
    induced pluripotent stem (iPS) cell-based research for regenerative
    medicine applications. The first product under the partnership, an
    "ultra-primary" human fibroblast cell line from which researchers can
    generate iPS cell lines, was launched under the SC Proven brand.

Other Business Activities

  *In 2012, we sold an aggregate of 9,647,471 shares of common stock for
    gross proceeds of approximately $20,452,000. These sales were made under
    a sales agreement entered into in June 2009 and the shares were offered
    under our shelf registration statement.
    
  *In 2012, an aggregate of 2,198,571 Series A Warrants were exercised. Upon
    exercise, we received gross proceeds of approximately $3,078,000 and
    issued 2,198,571 shares of common stock. The Series A Warrants have an
    initial exercise price of $1.40 per share and expire in December 2016.
    
  *In 2012, an aggregate of 2,700,000 Series B Warrants were exercised. Upon
    exercise, we received gross proceeds of $3,375,000 and issued 2,700,000
    shares of common stock and 2,700,000 Series A Warrants. The remaining
    5,300,000 Series B Warrants expired unexercised by their terms on May2,
    2012.

Fourth Quarter and Full-Year Financial Results

For the fourth quarter of 2012, we reported a net loss of $2,759,000, or
$(0.07) per share, compared with a net loss of $7,212,000, or $(0.47) per
share, for the fourth quarter of 2011.Loss from operations in the fourth
quarter of 2012 was $6,793,000, which was 7% lower compared to the fourth
quarter of 2011.

Total revenue during the fourth quarter of 2012 was $211,000, compared to
$541,000 in the same period of 2011.The decline was primarily due to higher
revenue from licensing agreements in 2011.Total operating expenses in the
fourth quarter of 2012 were $6,949,000, an 11% decrease compared to the fourth
quarter of 2011.In the fourth quarter of 2012, selling, general and
administrative expenses totaled $2,111,000, which was 8% lower compared to
the same period of 2011, while research and development expenses totaled
$4,681,000, or 3% lower than in the fourth quarter of 2011.

Net other income in the fourth quarter of 2012 was $4,034,000, compared to net
other income of $101,000 in the fourth quarter of 2011.The change from 2011
to 2012 was primarily due to changes in the estimated fair value of warrant
liability.

For the full year 2012, we reported a net loss of $28,491,000, or $(0.99) per
share, compared with a net loss of $21,328,000, or $(1.50) per share, for
2011. Loss from operations was $22,545,000, which was 20% lower when compared
to $28,076,000 for 2011.

In 2012, revenue from our SC Proven line of media and reagents increased 29%
to approximately $856,000.This increase in product sales drove a 12% increase
in total revenue, to $1,368,000 in 2012 compared to $1,221,000 in 2011.

Total operating expenses in 2012 were $23,650,000, a 19% decrease compared to
2011. Research and development expenses in 2012 were $15,847,000, a 21%
decrease compared to $19,938,000 in 2011. Selling, general and administrative
expenses in 2012 were $7,447,000, a 9% decrease compared to $8,202,000 in
2011. The reduction in operating expenses was primarily attributable to the
reduction in force effected in May 2011 and decrease in facilities and other
operating expenses attributable to the relocation of our corporate
headquarters and core research activities in July 2011.

In 2012, net other income was an expense of $5,946,000, while in 2011, net
other income was income of $6,748,000. Net other income is primarily driven
by changes in the estimated fair value of warrant liability, with increases in
the warrant liability shown as an expense and decreases shown as income.The
warrant liability increased by $5,945,000 in 2012, while it decreased by
$6,612,000 in 2011.

For the full year 2012, cash used in operations totaled $19,869,000, a 10%
decrease compared to $22,058,000 in 2011.

At December 31, 2012, cash, cash equivalents and marketable debt securities
totaled $24,410,000 on a pro forma basis. This total includes $2,038,000 in
aggregate net proceeds received subsequent to the end of the quarter from the
sale of shares of common stock and the exercise of Series A Warrants.

Conference Call

StemCells will host a live conference call and webcast on Thursday, March 21,
at 4:30 PM Eastern Time (1:30 PM Pacific Time) to discuss our financial
results and recent business activities.Interested parties are invited to
listen to the call over the Internet via the Investors section of our website
at http://investor.stemcellsinc.com/phoenix.zhtml?c=86230&p=irol-irhome. An
archived version of the webcast will be available for replay on our website
beginning approximately two hours following the conclusion of the live call
and continuing for a period of 30 days.

About StemCells, Inc.

StemCells, Inc. is engaged in the research, development, and commercialization
of cell-based therapeutics and tools for use in stem cell-based research and
drug discovery. The Company's lead therapeutic product candidate, HuCNS-SC®
cells (purified human neural stem cells), is currently in development as a
potential treatment for a broad range of central nervous system disorders. In
a PhaseI clinical trial in Pelizaeus-Merzbacher disease (PMD), a fatal
myelination disorder in children, the Company has shown preliminary evidence
of progressive and durable donor-derived myelination in all four patients
transplanted with HuCNS-SC cells.The Company is also conducting a Phase I/II
clinical trial in chronic spinal cord injury in Switzerland and has reported
positive interim data for the first patient cohort.The Company is also
conducting a Phase I/II clinical trial in dry age-related macular degeneration
(AMD), and is pursuing preclinical studies in Alzheimer's disease. StemCells
also markets stem cell research products, including media and reagents, under
the SC Proven® brand.Further information about StemCells is available at
http://www.stemcellsinc.com.

The StemCells, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=7014

Apart from statements of historical fact, the text of this press release
constitutes forward-looking statements within the meaning of the U.S.
securities laws, and is subject to the safe harbors created therein. These
statements include, but are not limited to, statements regarding the future
business operations of StemCells, Inc. (the "Company"); the timing and
prospects associated with detecting potential clinical benefit from the use of
the Company's HuCNS-SC cells; the prospect for continued clinical development
of the Company's HuCNS-SC cells in CNS disorders; the prospect for growth in
the Company's product sales; the Company's ability to apply for, and possibly
secure funding from, the California Institute of Regenerative Medicine; and
the adequacy of our existing supply of HuCNS-SC cells to complete our ongoing
and planned clinical trials. These forward-looking statements speak only as of
the date of this news release. The Company does not undertake to update any of
these forward-looking statements to reflect events or circumstances that occur
after the date hereof. Such statements reflect management's current views and
are based on certain assumptions that may or may not ultimately prove valid.
The Company's actual results may vary materially from those contemplated in
such forward-looking statements due to risks and uncertainties to which the
Company is subject, including uncertainties with respect to the fact that
additional trials will be required to confirm the safety and demonstrate the
efficacy of the Company's HuCNS-SC cells for the treatment of spinal cord
injury, AMD, PMD, or any other condition; uncertainties about whether
myelination formed by donor cells, if any, will have any biologic effect;
uncertainties about whether preliminary data in any PhaseI clinical study
will prove to be reproducible or biologically meaningful in any future
clinical study; risks whether the FDA or other applicable regulatory agencies
will permit the Company to continue clinical testing or conduct future
clinical trials; uncertainties about the design of future clinical trials and
whether the Company will receive the necessary support of a clinical trial
site and its institutional review board to pursue future clinical trials;
uncertainties regarding the potential for the Company to grow its SC Proven
business; uncertainties regarding the Company's ability to obtain the
increased capital resources needed to continue its current and planned
research and development operations; uncertainties about the Company's ability
to secure funding from any governmental agency, such as the California
Institute of Regenerative Medicine; uncertainty as to whether HuCNS-SC cells
and any products that may be generated in the future in the Company's
cell-based programs will prove safe and clinically effective and not cause
tumors or other adverse side effects; uncertainties regarding whether results
in preclinical research in animals will be indicative of future clinical
results in humans; uncertainties regarding the Company's manufacturing
capabilities given its increasing preclinical and clinical commitments;
uncertainties regarding the validity and enforceability of the Company's
patents; uncertainties as to whether the Company will become profitable; and
other factors that are described under the heading "Risk Factors" disclosed in
Part I, Item 1A in the Company's Annual Report on Form 10-K for the year ended
December 31, 2011 and in its subsequent reports on Form 10-Q and Form 8-K.


StemCells, Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)
                                                               
                              Three months ended      Twelve months ended
                              December 31             December 31
                              2012        2011        2012        2011
Revenue:                                                        
Revenue from licensing         $40       $395      $512      $558
agreements and grants
Revenue from product sales     171        146        856        663
Total revenue                  211        541        1,368      1,221
Cost of product sales          55         47         263        215
Gross profit                   156        494        1,105      1,006
                                                               
Operating expenses:                                             
Research and development       4,681      4,834      15,847     19,938
Selling, general and           2,111      2,290      7,447      8,202
administrative
Wind-down expenses             157        28         356        287
Impairment of intangible asset --         655        --         655
                                                               
Total operating expenses      6,949      7,807      23,650     29,082
                                                               
Loss from operations           (6,793)    (7,313)    (22,545)   (28,076)
                                                               
Other income (expense):                                         
Realized gain on sale of       --         --         --         84
marketable securities
Change in fair value of        4,030      112        (5,945)    6,612
warrant liability
Interest income (expense), net (4)        (13)       (35)       (57)
Other income (expense), net    8          2          34         109
Total other income (expense),  4,034      101        (5,946)    6,748
net
                                                               
Net loss                       $(2,759)  $(7,212)  $(28,491) $(21,328)
                                                               
Basic and diluted net loss per $(0.07)   $(0.47)   $(0.99)   $(1.50)
share
                                                               
Shares used to compute basic   37,256,496 15,244,718 28,824,417 14,187,885
and diluted loss per share



StemCells, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
                                                           
                                          December 31, 2012 December 31, 2011
                                          (unaudited)       (unaudited)
ASSETS:                                                     
Current Assets:                                             
Cash & cash equivalents                    $8,471          $13,311
Marketable securities                      13,901           3,281
Other current assets                       1,669            796
Total current assets                       24,041           17,388
                                                           
Property, plant and equipment, net         1,375            2,055
Goodwill and other intangible assets, net  3,807            3,906
Other assets, non-current                  947              1,856
Total assets                               $30,170         $25,205
                                                           
LIABILITIES AND STOCKHOLDERS' EQUITY:                       
Current liabilities                        5,097            5,653
Fair value of warrant liability            9,265            6,042
Other non-current liabilities              1,823            2,785
Stockholders' equity                       13,985           10,725
Total liabilities and stockholders' equity $30,170         $25,205

CONTACT: Rodney Young
         StemCells, Inc.
         Chief Financial Officer
         (510) 456-4128
        
         Ian Stone
         Russo Partners
         (619) 308-6541

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