StemCells, Inc. Reports First Quarter 2013 Financial Results and Provides Business Update

StemCells, Inc. Reports First Quarter 2013 Financial Results and Provides
Business Update

NEWARK, Calif., May 9, 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 reported financial results for the first quarter ended March 31, 2013
and provided a business update.

"In the first quarter, we reported the most recent data from our spinal cord
injury trial, which showed that the multi-segmental gains in sensory function
observed at the six-month time point in two of three patients had persisted
through the twelve-month assessment, and that one of the two had converted
from a complete injury to an incomplete injury classification," said Martin
McGlynn, President and CEO of StemCells, Inc. "This exciting development
follows the publication, last fall, of the data from our Phase I PMD trial
showing evidence of new myelin formation on the nerve axons of all four
patients in the trial and gains in neurological function in three of the four
patients. Our encouraging data to date tells us that we are on the right
track, and we are now focused on accelerating enrolment in our ongoing trials.
We have taken concrete steps to this end in our spinal cord injury trial, and
the recent addition of the Byers Eye Institute at Stanford should also result
in faster enrolment in our dry AMD trial.

"At the same time, we recognize the need to be as cash-efficient as possible,
and the results this quarter indicate how we are prioritizing spending. In
addition, we are pleased to have reached agreement with the California
Institute for Regenerative Medicine (CIRM) for $19.3 million in funding in the
form of a forgivable loan to support our IND-enabling activities for
Alzheimer's disease, and with Silicon Valley Bank for a $10 million loan on
very competitive terms. These agreements will bolster our resources and give
us additional financial flexibility as we execute our strategy."

First Quarter and Recent Business Highlights

  *In February 2013, the first patient cohort in our Phase I/II clinical
    trial with our HuCNS-SC cells for chronic spinal cord injury completed the
    trial, and data from this first cohort showed that the multi-segment gains
    in sensory function observed at the six month assessment in two of the
    three patients had persisted to the 12 month assessment. The third patient
    remained stable.
    
  *In March 2013, we acquired certain patents and patent applications from
    NsGene A/S, a Danish company. These patents and patent applications claim
    a purified population of GFAP+ Nestin+ precursor cells in which one or
    more of the cells are capable of differentiating into neurons.
    
  *In April 2013, we added the Byers Eye Institute at Stanford as the second
    site for our Phase I/II clinical trial with our HuCNS-SC cells in dry
    age-related macular degeneration (AMD).
    
  *In April 2013, we entered into an agreement with CIRM for approximately
    $19.3 million to help fund preclinical development and IND-enabling
    activities of our HuCNS-SC cells for Alzheimer's disease, with the goal of
    filing an Investigational New Drug (IND) application within four years.
    The funding, which is in the form of a forgivable loan, was awarded under
    CIRM's Disease Team Therapy Development Award program (RFA 10-05). We
    declined a second award under RFA 10-05 for cervical spinal cord injury.
    
  *In April 2013, we closed a $10 million loan from Silicon Valley Bank
    (SVB). The loan has a three-year term and the loan funds will be used for
    general corporate purposes.

First Quarter Financial Results

Total revenue during the first quarter of 2013 was $284,000, compared to
$644,000 in the same period of 2012.The first quarter of 2012 included a
one-time fee from a license agreement with genOway, under which we granted
genOway a worldwide, exclusive license to our IRES technology for use in the
development and commercialization of genetically engineered mice. Revenue
from product sales in the first quarter were $208,000, compared to $271,000 in
the first quarter of 2012. This 23% decline was primarily attributable to
lower unit volumes in the first quarter of 2013. The order book for April
was strong, however, getting us off to a positive start for the second
quarter.

Total operating expenses in the first quarter of 2013 were $6,475,000, a 10%
increase compared to the same period in 2012.This increase was driven by a
16% increase in research and development expenses, while selling, general and
administrative expenses declined by 2% compared to the same period of 2012.
The increase in research and development expenses was primarily attributable
to higher external services expenses related to preclinical studies of our
HuCNS-SC cells and expenses related to quality control, process development
and manufacturing activities to support our ongoing clinical trials.Loss from
operations in the first quarter of 2013 was $6,258,000, a 17% increase
compared to the $5,326,000 loss from operations in the first quarter of 2012.

Other expense in the first quarter of 2013 was $159,000, compared to other
expense of $4,903,000 in the first quarter of 2012.This decrease in other
expense was primarily due to a decrease in the estimated fair value of our
warrant liability, with increases in the warrant liability shown as an expense
and decreases shown as income.

For the first quarter of 2013, net loss was $6,417,000, or $(0.17) per share,
compared with a net loss of $10,229,000, or $(0.45) per share, for the first
quarter of 2012.Net cash used in operating activities in the first quarter of
2013 was $6,652,000.

At March 31, 2013, our cash, cash equivalents and marketable debt securities
totaled $17,049,000. In April, we received $9.9 million in net proceeds from
a loan we entered into with Silicon Valley Bank. Including the loan proceeds,
our pro forma cash balance at March 31, 2013, was $27.0 million. 

Conference Call

StemCells will host a live conference call and webcast today, May 9, 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-calendar. An
archived version of the webcast will be available for replay on our website
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.

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 and timing for continued clinical
development of the Company's HuCNS-SC cells in CNS disorders; the prospect for
growth in the Company's product sales; and the timing and prospects for
funding by the California Institute for Regenerative Medicine. 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 and to advance the development and
commercialization of stem cell-based assays for drug discovery and
development; the risk that our clinical trials could be substantially delayed
beyond their expected dates or cause us to incur substantial unanticipated
costs; 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 for
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, 2012 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
                                                      March 31
                                                      2013        2012
Revenue:                                                          
Revenue from licensing agreements, grants and other    $76       $373
Revenue from product sales                             208        271
Total revenue                                          284        644
Cost of product sales                                  67         72
Gross profit                                           217        572
                                                                 
Operating expenses:                                               
Research and development                               4,564      3,939
Selling, general and administrative                    1,888      1,924
Wind-down expenses                                     23         35
                                                                 
Total operating expenses                               6,475      5,898
                                                                 
Loss from operations                                   (6,258)    (5,326)
                                                                 
Other income (expense):                                           
Change in fair value of warrant liability              (189)      (4,941)
Interest income (expense), net                         (3)        (10)
Other income (expense), net                            33         48
Total other income (expense), net                      (159)      (4,903)
                                                                 
Net loss                                               $(6,417)  $(10,229)
                                                                 
Basic and diluted net loss per share                   $(0.17)   $(0.45)
                                                                 
Shares used to compute basic and diluted loss per      38,263,434 22,958,498
share




StemCells, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
                                          March 31, 2013 December 31, 2012
                                          (unaudited)    (unaudited)
ASSETS:                                                  
Current Assets:                                          
Cash & cash equivalents                    $7,231       $8,471
Marketable securities                      9,818         13,901
Other current assets                       1,565         1,669
Total current assets                       18,614        24,041
                                                        
Property, plant and equipment, net         1,519         1,375
Goodwill and other intangible assets, net  3,571         3,806
Other assets, non-current                  1,060         948
Total assets                               $24,764      $30,170
                                                        
LIABILITIES AND STOCKHOLDERS' EQUITY:                    
Current liabilities                        3,742         5,097
Fair value of warrant liability            9,035         9,265
Other non-current liabilities              1,779         1,823
Stockholders' equity                       10,208        13,985
Total liabilities and stockholders' equity $24,764      $30,170

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

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