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StemCells, Inc. Reports Fourth Quarter and Fiscal 2010 Financial Results and Business Highlights

PALO ALTO, Calif., Mar 11, 2011 (GlobeNewswire via COMTEX) --

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 fourth quarter and year ended December 31, 2010 and recent business highlights.

"In 2010 we made significant progress towards achieving our business imperative of translating groundbreaking science into breakthrough medicine for disorders of the central nervous system," said Martin McGlynn, President and CEO of StemCells, Inc. "To date, ten patients have been successfully transplanted with our HuCNS-SC(R) cells, our human safety database is growing and continues to be very encouraging, the cells required for use in our future clinical trials have been banked, and we are well on our way to broadening our clinical development program beyond the brain to also include the spinal cord and the eye.

"The capital markets remain challenging for small cap biotech stocks, so we continue to look for ways to minimize our appetite for dilutive equity--based financings by reducing infrastructure and G&A expenses, increasing revenues from product sales in our small, but rapidly growing SC Proven(R) media and reagents business, and monetizing some of our investments in non-core assets."

Highlights for 2010 and Significant Recent Events

Therapeutic Product Development

  --  In February 2010, the first patient in a Phase I trial of our HuCNS-SC
      human neural stem cells in Pelizaeus-Merzbacher Disease (PMD) was
      enrolled and dosed at UCSF Benioff Children's Hospital, marking the
      first time that neural stem cells have been transplanted as a potential
      treatment for a myelination disorder. In February 2011, the fourth and
      final patient in this trial was enrolled and transplanted with our
      HuCNS-SC cells. Results of this trial will be reported in early 2012.
  --  In August 2010, we published new preclinical data demonstrating that our
      proprietary human neural stem cells restore lost motor function in mice
      with chronic spinal cord injury. This is the first published study to
      show that human neural stem cells can restore mobility even when
      administered at time points beyond the acute phase of trauma, suggesting
      the prospect of treating a much broader population of injured patients
      than previously demonstrated. The paper was published in the
      international peer-reviewed journal PLoS ONE.
  --  In October 2010, we initiated a Phase Ib clinical trial of our HuCNS-SC
      cells in neuronal ceroid lipofuscinosis (NCL, also often referred to as
      Batten disease). The goal of the Phase Ib trial is to enroll six
      patients with less advanced stages of the disease than those who
      participated in our Phase I NCL trial.   This Phase Ib trial is being
      conducted at Oregon Health & Science University (OHSU) Doernbecher
      Children's Hospital.
  --  In December 2010, we received authorization from Swissmedic, the Swiss
      regulatory agency, to initiate a Phase I/II clinical trial in
      Switzerland of our HuCNS-SC product candidate in chronic spinal cord
      injury. The trial is designed to assess both safety and preliminary
      efficacy in patients with varying degrees of paralysis who are three to
      12 months post-injury, and will progressively enroll patients based upon
      the severity of injury.


Tools and Technologies Programs

  --  In January 2010, we launched GS1-R(TM), the first commercially available
      cell culture medium to enable the derivation, maintenance and growth of
      true (germline competent) rat embryonic stem cells. GS1-R is expected to
      have significant utility in the creation of genetically engineered rat
      models of human disease for use in academic, medical and pharmaceutical
      research.
  --  In February 2010, we launched GS2-M(TM), a new cell culture medium that
      enables the derivation and long-term maintenance of true mouse induced
      pluripotent stem (iPS) cells. GS2-M has been shown to increase the
      efficiency of reprogramming 'pre-iPS' cells to derive fully pluripotent
      stem cells, and to maintain mouse iPS cells in a pluripotent state in
      long-term culture.
  --  In June 2010, published independent research demonstrated that our GS2-M
      cell culture media formulation enhances the pluripotency of human
      embryonic stem and induced pluripotent stem (iPS) cells. Our GS2-M
      medium has already been shown to enable the derivation and long-term
      maintenance of mouse iPS cells. With this new application of GS2-M,
      researchers may now be able to significantly advance human pluripotent
      stem cell research.
  --  In October 2010, we launched NDiff(R) N2, a defined serum-free cell
      culture supplement that has demonstrated utility for the in vitro neural
      differentiation of mouse embryonic stem cells, and a range of other
      applications, including the derivation, maintenance and expansion of
      neural stem cells and the differentiation of human and mouse neural stem
      cells into functional neurons.
  --  In December 2010, we launched STEM101(TM), STEM121(TM) and STEM123(TM),
      three new antibody reagents that significantly improve the visualization
      of human cells, including human stem cells and their progeny. These high
      potency antibody reagents, which expand the range of our SC Proven
      portfolio of research products, provide tools for the detection,
      tracking and characterization of human cells both in vitro and in vivo
      when transplanted into animal models of human diseases.
  --  In January 2011, we launched STEM24(TM) and STEM133(TM), two new
      antibody reagents that have utility for the detection of a range of
      different human cell types.


Intellectual Property and Licensing Activities

  --  In March 2010, the United Kingdom (UK) Intellectual Property Office
      granted us patent number GB2451523 with broad claims covering true
      (germline competent) rat stem cells and genetically engineered rats
      derived from these cells. The patented technology is expected to have
      significant utility to academic and pharmaceutical industry researchers
      by enabling them to create novel rat models for the study of human
      diseases.
  --  In August 2010, independent researchers used our technology to achieve
      the first genetically engineered rat derived from rat embryonic stem
      cells. This breakthrough work, published in the international
      peer-reviewed journal Nature, makes possible the types of genetic
      manipulations previously only possible in mice. Both mice and rats are
      used as animal models of human disease; however certain aspects of the
      rat's physiology, behavior, and metabolism are closer to the human,
      making rats the preferred species for drug development and studying
      human disease.


Financing and Other Business-related Activities

  --  In June 2010, we appointed R. Scott Greer to our Board of Directors. Mr.
      Greer is a successful entrepreneur with a proven track record in
      developing and growing life sciences companies, and adds more than
      twenty-five years of life sciences and financial services industry
      experience to our Board. In addition, we established as a standing
      committee of the Board a Strategic Transactions Committee, which Mr.
      Greer chairs.
  --  In June 2010, we raised gross proceeds of $6,055,000 through the sale of
      7,000,000 shares of common stock to an institutional investor at a price
      of $0.865 per share. No warrants were issued in this transaction.
  --  In October 2010, we were awarded cash grants totaling $978,000 for
      projects related to our CNS and Liver programs. These grants were
      certified under the federal government's Qualifying Therapeutic
      Discovery Project (QTDP) program, which was created as part of the
      Patient Protection and Affordable Care Act of 2010. All four project
      applications submitted by us were approved, and we received the entire
      grant amounts in December 2010.
  --  In January 2011, we raised gross proceeds of $10,000,000 through the
      sale of 10,000,000 shares of common stock to selected institutional
      investors at a price of $1.00 per share. The investors were also granted
      an option to purchase an additional 6,000,000 shares at $1.00 per share.
      The option was not exercised and expired on February 18, 2011.


Fourth Quarter and Full-Year Financial Results

For the fourth quarter of 2010, the Company reported a net loss of $8,957,000, or $(0.07) per share, compared with a net loss of $5,234,000, or $(0.05) per share, for the fourth quarter of 2009. Loss from operations in the fourth quarter of 2010 amounted to $7,706,000, or 5% lower than the loss from operations of $8,081,000 in the fourth quarter of 2009.

Total revenue increased 67% during the fourth quarter of 2010 to $699,000, compared to $418,000 in the same period of 2009, primarily due to the receipt of a milestone payment from a licensee, as well as higher product sales revenue from the Company's SC Proven line of media and reagents.

Other income (expense) in the fourth quarter of 2010 was $(1,251,000) compared to $2,847,000 in the fourth quarter of 2009. The increased expense in the fourth quarter of 2010 reflects an increase in the estimated fair value of warrant liability of $2,179,000, which was partially offset by $978,000 in grants received under the federal government's Qualifying Therapeutic Discovery Project (QTDP) program.

For the full year 2010, the Company reported a net loss of $25,244,000, or $(0.20) per share, compared with a net loss of $27,026,000, or $(0.25) per share, for 2009. Loss from operations was $29,359,000, which was essentially flat compared to $29,378,000 for 2009.

Total revenue in 2010 was $1,427,000, a 44% increase over total revenue of $993,000 reported in 2009. Licensing and grant revenue increased 53% in 2010 compared to 2009, while product sales revenue from the Company's SC Proven line of media and reagents increased 29% over 2009.

Total operating expenses in 2010 were $30,618,000, a 2% increase compared to $30,110,000 in 2009. Research and development expenses in 2010 were $21,019,000, compared to $19,930,000 in 2009. Selling, general and administrative expenses in 2010 were $9,377,000, a 2% decrease compared to $9,530,000 in 2009.

Other income in 2010 was $4,115,000, compared with $2,352,000 in 2009. Other income in both periods was primarily driven by a decrease in the estimated fair value of warrant liability, which totaled $3,005,000 in 2010 and $1,899,000 in 2009. Other income in 2010 also included $978,000 in grants received under the QTDP program.

For the full year 2010, cash used in operations totaled $24,520,000, compared to $24,683,000 in 2009. At December 31, 2010, the Company's cash, cash equivalents and marketable debt securities totaled $19,708,000. On January 10, 2011, the Company raised approximately $9,400,000 in net proceeds through the sale to institutional investors of 10,000,000 shares of common stock at $1.00 per share. On a pro forma basis, including the net proceeds from the sale of these shares, the Company's cash, cash equivalents and marketable debt securities at December 31, 2010 would be $29,108,000.

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. In its therapeutic product development programs, StemCells is targeting disorders of the central nervous system and the liver. StemCells' lead product candidate, HuCNS-SC(R) cells (purified human neural stem cells), is currently in clinical development for spinal cord injury and two fatal neurodegenerative disorders in children, and in preclinical development for retinal disorders such as age-related macular degeneration. StemCells also markets stem cell research products, including media and reagents, under the SC Proven(R)brand, and is developing stem cell-based assay platforms for use in pharmaceutical research, drug discovery and drug development. 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 adequacy of our banked cells to conduct our clinical studies; the possibility of dilutive equity-based financing; the prospects for reducing infrastructure and G&A expenses; 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; and the Company's ability to monetize some of its investments and non-core assets and to secure partnering and licensing opportunities. 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 NCL, PMD or any other condition; risks whether the FDA or other applicable regulatory agencies will permit the Company to continue clinical testing in NCL, PMD, spinal cord injury or in future clinical trials of proposed therapies for other diseases or conditions such as age-related macular degeneration; 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 in NCL, PMD, spinal cord injury, age-related macular degeneration, or in proposed therapies for other diseases or conditions; 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; uncertainties regarding the Company's ability to obtain the increased capital resources needed to continue its current and planned research and development operations, including such operations of the Company for non-therapeutic applications, and to conduct the research, preclinical development and clinical trials necessary for regulatory approvals; 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, 2010.


  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
                                   --------------------------  --------------------------

                                       2010          2009          2010          2009
                                   ------------  ------------  ------------  ------------
  Revenue:
   Revenue from licensing
    agreements and grants                 $ 519         $ 308         $ 928         $ 608

   Revenue from product sales               180           110           499           385
                                   ------------  ------------  ------------  ------------
  Total revenue                             699           418         1,427           993

  Cost of product sales                      64            60           168           261
                                   ------------  ------------  ------------  ------------
  Gross profit                              635           357         1,259           732

  Operating expenses:
   Research and development               5,923         5,651        21,019        19,930
   Selling, general and
    administrative                        2,487         2,678         9,377         9,530

   Wind-down expenses                      (69)           110           222           650
                                   ------------  ------------  ------------  ------------


  Total operating expenses                8,341         8,438        30,618        30,110
                                   ------------  ------------  ------------  ------------

  Loss from operations                  (7,706)       (8,081)      (29,359)      (29,378)

  Other income (expense):
   Qualifying therapeutic
    discovery project grant                 978            --           978            --
   Realized gain on sale of
    marketable securities                    --             9            --           407
   Change in fair value of
    warrant liability                   (2,179)         2,721         3,005         1,899
   Interest expense, net                   (19)          (14)          (67)          (43)

   Other income (expense), net             (31)           131           199            90
                                   ------------  ------------  ------------  ------------
  Total other income (expense),
   net                                  (1,251)         2,847         4,115         2,352
                                   ------------  ------------  ------------  ------------


  Net loss                            $ (8,957)     $ (5,234)    $ (25,244)    $ (27,026)
                                   ============  ============  ============  ============

  Basic and diluted net loss per
   share                               $ (0.07)      $ (0.05)      $ (0.20)      $ (0.25)
                                   ============  ============  ============  ============

  Shares used to compute basic
   and diluted loss per share       127,124,022   114,870,995   123,302,992   106,045,961
                                   ============  ============  ============  ============



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


                                 December   December
                                 31, 2010   31, 2009
                                ---------  ---------
  ASSETS:
  Current Assets:
   Cash & cash equivalents       $ 19,708   $ 38,618
   Marketable securities              191        197

   Other current assets             1,270      1,326
                                ---------  ---------
  Total current assets             21,169     40,141

  Property, plant and
   equipment, net                   2,627      2,857
  Goodwill and other
   intangible assets, net           4,874      5,667

  Other assets, non-current         1,932      2,525
                                ---------  ---------

  Total assets                   $ 30,602   $ 51,190
                                =========  =========

  LIABILITIES AND
   STOCKHOLDERS' EQUITY:
  Current liabilities               5,528      6,530
  Fair value of warrant
   liability                        6,672      9,677
  Other non-current
   liabilities                      2,921      4,488

  Stockholders' equity             15,481     30,495
                                ---------  ---------
     Total liabilities and
      stockholders' equity       $ 30,602   $ 51,190
                                =========  =========

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: StemCells, Inc.

CONTACT: Investor Inquiries
StemCells, Inc.
Megan Meloni
(650) 475-3105
Media
Russo Partners
Ian Stone (619) 528-2220
David Schull (212) 845-4271