STEMCELLS REPORTS FINANCIAL RESULTS FOR SECOND QUARTER OF 2003

New European Patents Issued.

PALO ALTO, Calif., August 5, 2003 – StemCells, Inc. (NASDAQ: STEM) today reported its financial results for the second quarter ended June 30, 2003.

StemCells' net loss applicable to common shareholders was $3.9 million, or $0.13 per share, for the second quarter of 2003, compared to a net loss of $3.5 million, or $0.15 per share, for the same period in 2002. Cash and cash equivalents were $6.5 million as of June 30, 2003.

The increase in net loss for the second quarter of 2003, when compared with the second quarter of 2002, was primarily attributable to the recording of deemed dividends of $1.2 million related to certain convertible preferred stock. The deemed dividend includes the accretion of common stock warrants, the beneficial conversion feature and the related issuance costs, as explained in the Report on Form 10-Q filed yesterday. Total operating expenses were $2.7 million for the three months ended June 30, 2003, compared with $3.2 million for the same period in 2002. For the six months ended June 30, 2003, total operating expenses were $5.2 million as compared with $6.0 million for the same period in 2002. The decrease in operating expenses in 2003 when compared to 2002 was primarily attributable to a planned decrease in overall spending that was initiated in September 2002.

Martin McGlynn, President & CEO said, "We are pleased we have continued to decrease our overall spending this quarter, while also progressing in the pre-clinical development efforts of our stem cell technology. The major financial news of the quarter was announced in early May, when we received $6.5 million from the sale of common stock to The Riverview Group, LLC, which greatly improved our financial situation."

Mr. McGlynn added, "We are also making great strides in expanding our intellectual property portfolio to help sustain our position at the forefront of the neural stem cell field. In addition to the U.S. patents granted and announced previously, several European patents have been issued on important technology for which we are the exclusive licensee. I believe these may be the first neural stem cell patents to have been issued in Europe."

The five European patents, for which StemCells is the exclusive licensee, include four issued in 2003 and one issued in 2002. These patents cover:

- Methods for in vitro production of a cell culture of multipotent neural stem cells and the cell cultures obtainable by those methods (#0 594 669)

- Methods of obtaining differentiated cells from mammalian neural stem cells using a substrate (#0 669 973)

- Methods of obtaining differentiated cells from mammalian neural stem cells using a culture medium (#1 298 202)

- Methods for in situ proliferation and differentiation of a mammalian central nervous system precursor cell (#0 728 194)

- Use of neural stem cells in remyelination in the treatment of diseases including multiple sclerosis, issued 2002 (#0 664 832)

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About StemCells Inc.
StemCells, Inc is a biotechnology company focused on the discovery, development and commercialization of stem cell-based therapies to treat diseases of the 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. Further information about the Company is available on its web site at www.stemcellsinc.com.

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."

Corporate Contact:

StemCells, Inc.
Martin McGlynn, President & CEO
650-475-3100, ext 108

BMC Communications Group (media)
Brad Miles
212-477-9007, ext. 17

Media / Investor Relations Contact:

The Investor Relations Group

Janet Vasquez / Jane Lin
212-825-3210

StemCells Inc.
Condensed Consolidated Statement of Operations
(in thousands, except share and per share amounts)
	Three months ended		Six months ended
	June 30,		June 30,
	2003	2002	2003	2002
Revenue from grants and Licensing agreements	$60	$125	$119	$237
Operating Expenses
Research and development	1,740	2,114	3,080	3,652
General & administrative	1,002	1,052	2,071	2,391
Total operating expenses	2,742	3,166	5,151	6,043
Loss from operations	(2,682)	(3,041)	(5,032)	(5,806)
Other income (expense)	(30)	(17)	(90)	(62)
Net loss	(2,712)	(3,058)	(5,122)	(5,868)
Dividend to preferred shareholders	47	165	47	165
Deemed dividend	1,168	320	1,488	640
Net loss applicable to common shareholders	($3,927)	($3,543)	($6,657)	($6,673)
Net loss per share applicable to common shareholders; basic and diluted	($0.13)	($0.15)	($0.23)	($0.27)
Weighted average shares ñ basic and diluted	31,157,909	24,354,705	29,062,107	24,288,198

StemCells Inc.
Condensed Consolidated Balance Sheets
	June 30,	December 31,
	2003	2002
(in thousands)	(unaudited)		(a)
Assets
Current assets:
Cash & cash equivalents	$6,534	$4,236
Other current assets	295	274
Total current assets	6,829	4,510
Property, plant & equipment, net	3,974	4,338
Other assets, net	2,833	2,481
Total assets	$13,636	11,329
Liabilities and stockholders equity
Current liabilities	$1,432	999
Non-current liabilities	3,658	3,882
Convertible preferred stock	1,660	2,660
Stockholders' equity	6,886	3,788
Total liabilities, redeemable preferred stock and stockholders' equity	$13,636	$11,329
(a) Derived from audited financial statements included in StemCells' annual report on form 10-K filed with the SEC.