StemCells, Inc. Reports Second Quarter 2014 Financial Results and Provides Business Update

StemCells, Inc. Reports Second Quarter 2014 Financial Results and Provides
Business Update

Conference Call to Be Hosted August 12, 2014 at 4:30 p.m. EDT

NEWARK, Calif., Aug. 12, 2014 (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 second quarter ended June 30, 2014.

"The highlight for the quarter was the release of the first interim data from
our ongoing Phase I/II trial in dry age related macular degeneration (AMD),"
said Martin McGlynn, president and CEO of StemCells, Inc. "We reported
positive clinical findings, including a 70% reduction in the rate of
geographic atrophy, relative to the untreated eye. Geographic atrophy causes
vision loss in dry AMD. We also demonstrated an improvement in visual function
as measured by the ability to distinguish shades of light versus dark, also
referred to as 'contrast sensitivity' in four of the seven patients. These
findings are very encouraging and certainly exceeded our expectations."

"We also released additional interim data in our ongoing Phase I/II spinal
cord injury trial. The data continue to support the earlier findings
demonstrating a favorable safety profile and improvement in sensory function
in half of the subjects. Based upon these results we plan to initiate two
Phase II controlled proof of concept studies later this year, one in spinal
cord injury and the other in dry AMD. We are making great strides in our
clinical efforts and I am excited about the potential our platform technology
continues to show in these early clinical trials."

Recent Highlights:

  *We completed enrollment in our Phase I/II clinical trial in spinal cord
    injury. The multi-national, open-label, Phase I/II trial is evaluating
    both safety and preliminary efficacy of our proprietary HuCNS-SC^® cells
    as a treatment for chronic spinal cord injury. The trial enrolled twelve
    subjects with chest-level injury to the spinal cord. Final results from
    this landmark study are expected to be released mid-2015.
  *An interim update on the Phase I/II trial in spinal cord injury was
    presented at the Annual Meeting of the American Spinal Injury
    AssociationinSan Antonio, Texas. Interim analysis of clinical data to
    date has shown that the significant post-transplant gains in sensory
    function first reported in two patients have now been observed in two
    additional patients. The interim results also continue to confirm the
    favorable safety profile of the cells and the surgical implant procedure.
    In total, we have now reported clinical updates on a total of eight of the
    twelve patients enrolled in our Phase I/II clinical trial using our
    proprietary HuCNS-SC cells.
  *We reported positive interim results from our Phase I/II clinical trial
    for geographic atrophy of age related macular degeneration (AMD) at the
    12thannual meeting of theInternational Society for Stem Cell
    ResearchinVancouver, Canada. Interim results for the Phase I/II trial
    show a 70 percent reduction in the rate of geographic atrophy (GA) as
    compared to the control eye and a 65 percent reduction in the rate of GA
    as compared to the expected natural history of the disease. We also saw an
    improvement in visual acuity as measured by the ability to distinguish
    shades of light versus dark, also referred to as "contrast sensitivity" in
    four of the seven patients included in the interim data release. The Phase
    I/II trial has also demonstrated a favorable safety profile for our
    proprietary HuCNS-SC cells as a treatment for dry AMD. Final results from
    this landmark study are expected to be released mid-2015.
  *We stopped enrollment in our Phase I/II dry AMD trial based on the
    positive interim results. We are now focusing our efforts on the follow-on
    Phase II randomized, controlled proof-of-concept study in dry AMD that
    will initiate later this year.
  *We strengthened both our senior executive team and board.Stephen Huhn,
    M.D., F.A.C.S., F.A.A.P. was promoted to the newly created position of
    vice president, CNS clinical research and chief medical officer. Joel
    Naor, M.D., M.B.A., M.Sc., was hiredas vice president, clinical
    development, ophthalmology; Naymisha Patel was hired as vice president,
    quality systems; Mohammad A. El-Kalay, Ph.D., was hiredas vice president,
    process development. Alan Trounson, Ph.D., was appointed to our Board of
    Directors.
  *We raised gross proceeds of $20,000,000 through the sale of 11,299,435
    units to two institutional biotechnology investors, at an offering price
    of $1.77 per unit.Each unit consists of one share of our common stock and
    a warrant to purchase 0.85 of a share of our common stock.The warrants
    are exercisable six months from the date of issuance at an exercise price
    of $2.17.The Warrants are non-transferable and will expire thirteen
    months from the date of issuance. Should the warrants be exercised they
    would bring in approximately $20 million in additional capital next year.
    The proceeds from this financing, combined with the funds from the
    warrants, should they be exercised, would provide sufficient capital to
    finance our projected 2015 operating expenditures.

Second Quarter Financial Results

For the second quarter of 2014, the Company reported a net loss of
approximately $12,115,000, or $(0.22) per share, compared with a net loss of
approximately $5,868,000, or $(0.15) per share, for the second quarter of
2013. Approximately 70% of the net loss increase this quarter was associated
with a non-cash expense related to changes in the fair value of our warrant
liability. This is driven by changes in our stock price.

Total revenue for the second quarter of 2014 was approximately $242,000,
compared to approximately $281,000 for the same period of 2013.The decrease
of 14% from 2013 to 2014 was primarily due to lower revenue from our SC Proven
product sales in the second quarter of 2014.

Total operating expenses in the second quarter of 2014 were approximately
$8,268,000, compared to approximately $6,425,000 in the second quarter of
2013.The increase was primarily attributable to our on-going preparation to
initiate a controlled Phase II efficacy study to further investigate our
proprietary HuCNS-SC cells as treatment for spinal cord injury.

Other expenses, net in the second quarter of 2014 were approximately
$4,011,000, compared to other income, net of approximately $353,000 in the
second quarter of 2013.The change from 2013 to 2014 was primarily due to
non-cash expense related to changes in the estimated fair value of our warrant
liability. This is driven by changes in our stock price.

At June 30, 2014, cash and cash equivalents totaled approximately $17,847,000.
On a pro-forma basis, including the net proceeds received from the equity
financing and exercise of warrants received in July, the company had
approximately $37,800,000 in cash and cash equivalents.

Conference Call

StemCells will host a live conference call and webcast on Tuesday, August 12,
2014 at 4:30 PM Eastern Daylight Time (1:30 PM Pacific Daylight 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://edge.media-server.com/m/p/qhw8vz77/lan/en

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 platform technology, HuCNS-SC® cells (purified
human neural stem cells), are currently in development as a potential
treatment for a broad range of central nervous system disorders. In a Phase I
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,Canadaandthe
United States, and has reported positive interim data for the first eight
patients.The Company is also conducting a Phase I/II clinical trial in dry
age-related macular degeneration (AMD) inthe United States and has reported
positive interim data on seven of the 15 patients. In addition, the Company is
pursuing preclinical studies in Alzheimer's disease, with support from
theCalifornia Institute for Regenerative Medicine(CIRM).StemCells also
markets stem cell research products, including media and reagents, under the
SC Proven® brand.Further information aboutStemCellsis 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 for continued clinical development
of the Company's HuCNS-SC cells in CNS disorders; 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 preliminary data in
any Phase I 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 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 the Company's
manufacturing capabilities given its increasing preclinical and clinical
commitments; 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, 2013 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
                              2014        2013        2014        2013
Revenue:                                                        
Revenue from licensing         $23       $31       $47       $107
agreements, grants and other
Revenue from product sales     219        250        534        459
Total revenue                  242        281        581        566
Cost of product sales          78         77         165        144
Gross profit                   164        204        416        422
Operating expenses:                                             
Research and development       6,092      4,805      10,997     9,369
Selling, general and           2,176      1,582      4,423      3,469
administrative
Wind-down expenses             --         38         --         62
                                                               
Total operating expenses       8,268      6,425      15,420     12,900
                                                               
Loss from operations           (8,104)    (6,221)    (15,004)   (12,478)
Other income (expense):                                         
Change in fair value of        (3,654)    758        (3,981)    569
warrant liability
Interest expense, net          (342)      (391)      (720)      (394)
Other income (expense), net    (15)       (14)       (31)       18
Total other income (expense),  (4,011)    353        (4,732)    193
net
                                                               
Net loss                       $(12,115) $(5,868)  $(19,736) $(12,285)
                                                               
Basic and diluted net loss per $(0.22)   $(0.15)   $(0.36)   $(0.32)
share
                                                               
Shares used to compute basic   55,711,717 39,661,934 55,529,818 38,966,547
and diluted loss per share
                                                               
                                                               

StemCells, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)

                                          June 30, 2014 December 31, 2013
                                          (unaudited)   (unaudited)
ASSETS:                                                 
Current Assets:                                         
Cash & cash equivalents                    $17,847     $30,585
Other current assets                       1,055        1,255
Total current assets                       18,902       31,840
Property, plant and equipment, net         5,141        5,305
Goodwill and other intangible assets, net  3,935        3,975
Other assets, non-current                  382          437
Total assets                               $28,360     $41,557
LIABILITIES AND STOCKHOLDERS' EQUITY:                   
Current Liabilities:                                    
Accounts payable and accrued expenses      $4,319      $5,220
Loan payable net of discount, current      3,832        3,664
Other current liabilities                  145          248
Total current liabilities                  8,296        9,132
Fair value of warrant liability            8,526        5,542
Loan payable net of discount, non-current  11,107       9,245
Other non-current liabilities              2,974        2,684
Stockholders' equity                       (2,543)      14,954
Total liabilities and stockholders' equity $28,360     $41,557
                                                       

CONTACT: Greg Schiffman
         StemCells, Inc.
         Chief Financial Officer
         (510) 456-4128
        
         Andrea Flynn
         Russo Partners        
         (646) 942-5631

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