StemCells Announces Third Quarter 2002 Financial Results Thursday November 14, 4:02 pm ET

PALO ALTO, Calif., Nov. 14 /PRNewswire-FirstCall/ -- StemCells, Inc. (Nasdaq: STEM - News) today reported financial results for the third quarter ended September 30, 2002. StemCells' net loss was $2.7 million before dividends to preferred shareholders, or $0.11 per diluted share, for the third quarter of 2002, compared to a net loss of $1.8 million, or $0.08 per diluted share, for the same period in 2001. Cash and cash equivalents were $6.7 million at September 30, 2002, compared to $11.9 million at September 30, 2001.

The change in net results from 2001 to 2002 was primarily attributable to an increase in personnel, the effect of a lower valuation of non-qualified stock options on compensation cost in 2001, and the change in accounting treatment of our Rhode Island facilities' expenses, which were charged against a wind-down reserve in 2001. As this reserve was exhausted at the end of 2001, and we cannot now predict the exact disposal date of these properties, effective 2002, we are recording these expenses as normal general and administrative expenses.

In September, the Company announced a number of measures, including a reduction in force, in order to conserve cash and focus its efforts on pre-clinical development of its proprietary cells for the treatment of neural and liver disease. While its cash needs may vary, the Company expects that its current capital resources will be sufficient to fund its operations into the second quarter of 2003.

"This is obviously a challenging market and financing environment, but we continue to believe in the long term value of our strategic assets in the stem cell field," commented Martin McGlynn, President and CEO of StemCells.

"We are engaged in discussions with a number of potential merger or development partners who also recognize the value of our stem cell technology. While there can be no assurance that these discussions will result in any financing or other transaction, we believe that there is a growing realization of the commercial value of stem cell technology for both therapeutic and drug discovery purposes. Our challenge is to turn this emerging recognition into financial and co-development support for our own technology. In this regard, in the current funding environment, consolidation may well occur in the cell therapy field. We believe that our proprietary positions in the neural, liver and pancreatic stem cell areas and in related reagents, monoclonal antibodies and discovery technologies put us in a good position to participate in any such consolidation that may occur.

"We also face a number of near term challenges," Mr. McGlynn added. "Due to the decline in our stock price and the new Nasdaq listing requirement of $10,000,000 in 'stockholders' equity,' we face likely delisting from the Nasdaq National Market System. Under current market conditions, our equity line financing is not a realistic source for financing the Company's operations. We also continue to have significant financial obligations with regard to our former encapsulated cell therapy facilities in Rhode Island.

"Despite those challenges, we remain optimistic that by focusing our development efforts on our neural and liver programs, and exploring strategic financing alternatives, we will be able to achieve appropriate recognition for the value of our proprietary cell and related technologies," Mr. McGlynn said.

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StemCells, Inc. is a biotechnology company focused on the discovery, development and commercialization of stem cell-based therapies to treat diseases of the central nervous system, liver and pancreas. The Company's stem cell programs seek to repair or repopulate neural or other tissue that has been damaged or lost as a result of disease or injury.

Apart from statements of historical facts, the text of this press release constitutes forward-looking statements regarding, among other things, the future business operations of StemCells, Inc. ("the Company"). The forward-looking statements speak only as of the date of this news release. StemCells 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 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 continue its current research and development operations and to conduct the research, preclinical 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 the Company will achieve revenues from product sales or become profitable; uncertainties regarding the Company's obligations in regard to its former encapsulated cell therapy facilities in Rhode Island; and other factors that are described in Exhibit 99 to the Company's Annual Report on Form 10-K entitled "Cautionary Factors Relevant to Forward-Looking Statements."