StemCells Inc. Initiates Cost Reduction Program Focuses on Development of Neural and Liver Cells

PALO ALTO, Calif., Sep 23, 2002 /PRNewswire-FirstCall via COMTEX/ -- StemCells, Inc. (Nasdaq: STEM) today announced that it has initiated a cost reduction program that curtails expenditures on the company's discovery research activities in favor of channeling resources into accelerating preclinical development of its proprietary cells for the treatment of neural and liver disease. The company has already discovered and patented the human neural stem cell and has a number of patents pending in the liver and pancreas fields.

"We've invested a major portion of our resources to date to find the very rare stem or progenitor cells that we believe are resident in various human tissue such as the brain, liver and pancreas," said Martin McGlynn, CEO of StemCells Inc. "We've had great success in this endeavor, particularly with the isolation, purification and expansion of the human neural stem cell, and more recently with the identification of a number of candidate cells in the liver and pancreas fields. We are reducing our workforce and budget in order to concentrate all our resources on the primary goal of this company, which is to evaluate the potential of using these stem and progenitor cells to treat or even cure some of the world's most debilitating diseases."

StemCells has already initiated a major preclinical testing program, with assistance from a number of external collaborators, to evaluate the utility of its neural stem cells in an array of animal models of central nervous system disease, including Parkinson's, stroke, multiple sclerosis, lysosomal storage, as well as spinal cord injury. Furthermore, preclinical testing has begun with candidate human liver engrafting cells in a program targeting treatment of liver cancer and chronic liver failure. While the company has also identified a number of candidate cells with the potential to treat diseases of the pancreas, it will delay further work in this field until it secures funding from a partner. The decision by StemCells to scale back the scope of its operations comes after a recent review of its operating cost structure. The plan also includes a 25 percent reduction of staff and expenses once fully implemented by year-end.

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About StemCells Inc.
StemCells, Inc. uses proprietary technology to isolate, purify and expand stem or progenitor cells that are found in human tissue and which are at least committed to become the mature cells of the organ from which they were derived. StemCells' goal is to use these cells to repair or repopulate neural or other tissue that has been damaged or lost due to disease or injury. For more information about StemCells, Inc., please visit http://www.stemcellsinc.com.

Forward-Looking Statements
Statements in this press release other than statements of historical facts constitute forward-looking statements regarding, among other things, the future business operations of StemCells, Inc. The Company's actual results may vary materially from those contemplated in the forward looking statements due to risks and uncertainties to which the Company is subject, including uncertainties regarding the Company's ability to obtain the capital resources needed to conduct the research, pre-clinical development and clinical trials necessary for regulatory approvals; the fact that the Company's stem cell technology is at the pre-clinical stage and has not yet led to the development of any proposed product; the uncertainty whether any products that may be generated in the future in the Company's stem cell programs will prove clinically effective and not cause tumors or other side effects; the uncertainty whether tests of transplantation, drug effects, or other phenomena conducted in animal models will accurately predict results in humans; the uncertainty whether the uncertainty whether the Company will achieve revenues from product sales or become profitable; and others that are described in Exhibit 99 to the Company's Annual Report on Form 10-K entitled "Cautionary Factors Relevant to Forward Looking Statements."

SOURCE StemCells, Inc.

CONTACT: Martin McGlynn, President & CEO of StemCells, Inc., +1-650-475-3100, ext 108; Media - Brad Miles of BMC Communications Group, +1-212-477-9007, ext. 17