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

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

NEWARK, Calif., Aug. 7, 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 second quarter
ended June 30, 2013, and provided a business update.

"The data emerging from our clinical trials, including the two-year
Pelizeaus-Merzbacher disease (PMD) data announced last week, continue to build
our confidence that we are on the right track," said Martin McGlynn, President
and CEO of StemCells, Inc. "Our operational priority right now is to
accelerate patient enrollment, complete the ongoing Phase I/II trials and
quickly initiate Phase II proof-of-concept trials. To that end, we took a
number of important steps in the second quarter. First, we obtained
authorization from Health Canada to expand our spinal cord injury trial into
Canada and we are working diligently to initiate sites in the coming months.
Second, we added the Byers Eye Institute at Stanford as a site in our dry
age-related macular degeneration (AMD) trial, and are working to add others.
Third, we brought Eliseo Salinas, MD, on board as Executive Vice President and
Head of Research and Development, as well as other executives with deep
expertise in CNS product development.

"At the same time, we executed a number of creative financing transactions to
augment our capital resources and provide us with additional financial
flexibility. We remain committed to the strategy of building shareholder value
by generating meaningful clinical data in a cash-efficient manner."

Second Quarter and Recent Business Highlights

  *In April 2013, we added the Byers Eye Institute at Stanford, located in
    Palo Alto, Calif., as a second site for our Phase I/II clinical trial of
    our proprietary HuCNS-SC® cells in dry AMD.
  *In April 2013, we entered into an agreement with the California Institute
    for Regenerative Medicine (CIRM) under which CIRM will provide up to
    approximately $19.3 million to help fund preclinical development and
    IND-enabling activities of our proprietary HuCNS-SC cells for Alzheimer's
    disease. The funding, which will be in the form of a forgivable loan, was
    awarded under CIRM's Disease Team Therapy Development Award program (RFA
    10-05) in September 2012. The goal of the research will be to file an
    Investigational New Drug application with the U.S. Food and Drug
    Administration within four years.
  *In April 2013, we closed a $10 million loan from Silicon Valley Bank. The
    loan has a three-year term and the loan funds will be used for general
    corporate purposes.
  *In June 2013, Health Canada authorized us to expand our Phase I/II
    clinical trial for chronic spinal cord injury into Canada. The Phase I/II
    trial, currently underway in Zurich, Switzerland, is designed to evaluate
    the safety and preliminary efficacy of our proprietary HuCNS-SC cells as a
    treatment for chronic spinal cord injury. We are actively working to open
    one or more trial sites in Canada and begin screening patients.
  *In June 2013, we entered into an agreement with Lincoln Park Capital (LPC)
    under which we have the right to sell up to $30.0 million of common stock
    to LPC. Proceeds from any sales of stock under this agreement will be used
    for general corporate purposes. Under the terms of the agreement, we
    immediately sold 1,645,639 in shares of our common stock to LPC at $1.823
    per share and received gross proceeds of $3.0 million.
  *In June 2013, we strengthened our product development capabilities by
    adding Eliseo Salinas, MD, as Executive Vice President and Head of
    Research and Development, and by hiring several other executives with
    broad central nervous system (CNS) drug development experience and
    expertise.Prior to joining StemCells, Dr. Salinas served as Executive
    Vice President, Head of Development and Chief Medical Officer of Elan
    Pharmaceuticals, and previously held senior management positions at Shire
    plc, Adolor Corporation and Wyeth-Ayerst Research. In addition, we
    appointed Ann Tsukamoto, PhD, as Executive Vice President, Scientific and
    Strategic Alliances, responsible for alliances and building on our
    existing stem cell technology platform.
  *In July 2013, we formally launched our Alzheimer's disease program, which
    is being supported by CIRM, and received approximately $3.8 million as the
    initial disbursement of loan funds.
  *In August 2013, we presented data which show that, two years after
    transplantation of our proprietary HuCNS-SC cells into patients with PMD,
    the evidence of myelination by magnetic resonance imaging (MRI) is more
    pronounced compared to one year post-transplantation, the gains in
    neurological function reported after one year were maintained, and there
    were no safety concerns.The neurological and MRI changes suggest a
    departure from the natural history of the disease and may represent
    signals of a clinical effect.

Second Quarter Financial Results

Total revenue during the second quarter of 2013 was $282,000, compared to
$249,000 in the same period of 2012.Revenue from product sales was
approximately $250,000 in the second quarter of 2013, an increase of 19%
compared to the same period in 2012 due primarily to higher unit volumes. 

Total operating expenses in the second quarter of 2013 were $6,425,000, which
was 16% higher than the same period in 2012.This increase was driven by
higher research and development expenses, which increased 28% compared to the
same period in 2012 primarily due to increased costs for preclinical studies
of our HuCNS-SC cells and activities to conduct and support our clinical
trials.The increase in R&D expenses was partially offset by an 11% decrease
in selling, general and administrative expenses compared to the same period of
2012. Loss from operations in the second quarter of 2013 was $6,221,000, a
16% increase compared to the second quarter of 2012.

Other income in the second quarter of 2013 was $353,000, compared to other
income of $6,183,000 in the second quarter of 2012.This decrease in other
income was primarily related to changes 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 second quarter of 2013, net loss was $5,869,000, or $(0.15) per share,
compared with a net income of $834,000, or $0.03 per share, for the second
quarter of 2012.Net cash used in operating activities in the second quarter
of 2013 was $3,778,000. For the six months ended June 30, 2013, net cash used
in operating activities totaled $10,430,000, which was 3% lower than the
comparable period in 2012.

At June 30, 2013, our cash, cash equivalents and marketable debt securities
totaled $24,179,000. If we include the $3.8 million loan proceeds received
from CIRM in July, our pro forma cash, cash equivalents and marketable
securities at June 30, 2013, would have been $28.0 million.

Conference Call

StemCells will host a live conference call and webcast today, August 7, 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 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 conducting a Phase I/II
clinical trial in chronic spinal cord injury in Switzerland and Canada and has
reported positive interim data for the first three patients.The Company is
also conducting a Phase I/II clinical trial in dry age-related macular
degeneration (AMD) at two sites in the US. In addition, the Company is
pursuing preclinical studies in Alzheimer's disease, with support from the
California Institute for Regenerative Medicine (CIRM). StemCells also markets
stem cell research products, including media and reagents, under the SC
Proven® brand.Further information about StemCells is available at

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      Six months ended
                              June 30                 June 30
                              2013        2012        2013        2012
Revenue from licensing         $31       $38       $107      $411
agreements, grants and other
Revenue from product sales     250        210        459        482
Total revenue                  281        248        566        893
Cost of product sales          77         64         144        136
Gross profit                   204        184        422        757
Operating expenses:                                             
Research and development       4,805      3,749      9,369      7,687
Selling, general and           1,581      1,775      3,469      3,700
Wind-down expenses             39         10         62         45
Total operating expenses       6,425      5,534      12,900     11,432
Loss from operations           (6,221)    (5,350)    (12,478)   (10,675)
Other income (expense):                                         
Change in fair value of        757        6,206      569        1,265
warrant liability
Interest income (expense), net (391)      (11)       (394)      (22)
Other income (expense), net    (14)       (11)       18         36
Total other income (expense),  352        6,184      193        1,279
Net loss                       $(5,869)  $834      $(12,285) $(9,396)
Basic and diluted net income   $(0.15)   $0.03     $(0.32)   $(0.39)
(loss) per share
Shares used to compute basic
and diluted income (loss) per  39,661,934 24,806,769 38,966,547 23,882,634

StemCells, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
                                          June 30, 2013 December 31, 2012
                                          (unaudited)   (unaudited)
Current Assets:                                         
Cash & cash equivalents                    $22,753     $8,471
Marketable securities                      1,426        13,901
Other current assets                       1,816        1,669
Total current assets                       25,995       24,041
Property, plant and equipment, net         3,451        1,375
Goodwill and other intangible assets, net  3,509        3,806
Other assets, non-current                  1,097        948
Total assets                               $34,052     $30,170
Current liabilities                        7,822        5,097
Fair value of warrant liability            8,277        9,265
Other non-current liabilities              9,195        1,823
Stockholders' equity                       8,758        13,985
Total liabilities and stockholders' equity $34,052     $30,170

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

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