STEMCELLS REPORTS FINANCIAL RESULTS FOR THIRD QUARTER OF 2003

PALO ALTO, Calif., October 22, 2003 - StemCells, Inc. (NASDAQ: STEM) today reported its financial results for the third quarter ended September 30, 2003.

StemCells' net loss applicable to common shareholders was $2.6 million, or $0.08 per share, for the third quarter of 2003, compared to a net loss of $3.0 million, or $0.12 per share, for the same period in 2002. The decrease in net loss for the third quarter of 2003, when compared with the third quarter of 2002, was primarily attributable to the results of a cost reduction program that was initiated in September 2002. Cash and cash equivalents were $4.1 million as of September 30, 2003. At the current rate of expenditure, the Company's cash would fund operations into the second quarter of 2004.

"The Company is, of course, fully aware of the need to acquire additional capital" said Martin McGlynn, President and CEO of the Company. "In the wake of a number of positive developments announced previously, we have determined to take on a higher profile in the capital markets and to seek to attract capital from patient institutional biotech investors. In that regard, we have recently engaged the services of expert financial advisors to help us plan, as well as execute our financing strategy. I am pleased to say that we are close to finishing the planning phase."

After a major review of its client base, on October 15, 2003, Ernst & Young ("E&Y"), which has been the Company's independent public accountants, informed the Company of its intent to resign from that position after the filing of the Company's third quarterly report for 2003. E&Y informed the Company that there had been no disagreements on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

The Audit Committee of the Company's Board of Directors accepted the resignation today and directed Management to begin the search process for a new independent accounting firm, which will be selected by the Committee after full review. The Company immediately opened discussions with several nationally recognized independent public accounting firms.

"Our relationship with Ernst & Young has been a productive one over the years," Mr. McGlynn added, "but given the burdensome cost structure associated with a global accounting firm, and their projection of significantly increased costs for the provision of their services to us going forward, it was no longer a tenable one - particularly in light of additional expenses that will be necessary to assure compliance with various Sarbanes-Oxley Act requirements. The Act has, in my opinion, resulted in disproportionately high costs for the smaller publicly-traded companies. Nevertheless, we expect to be able to secure high quality, independent accounting services from a nationally recognized firm at a lower cost than E&Y can provide."

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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 Company's ability to hire new accountants at a lower cost, the time period over which the Company's current cash and cash equivalents will be sufficient to fund the Company's operations, the development of a financial strategy for the Company, the Company's ability to raise funds in the capital markets, and the timing of the clinical development of the Company's therapeutic programs. 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 progress to clinical trial in the timeframe projected, or at all; 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: Media / Investor Relations Contact:

StemCells, Inc. The Investor Relations Group
Martin McGlynn, President & CEO Janet Vasquez / Jane Lin
650-475-3100, ext 108 212-825-3210

StemCells Inc.
Condensed Consolidated Statement of Operations
(in thousands, except share and per share amounts)
	Three months ended		Nine months ended
	September 30,		September 30,
	2003	2002	2003	2002
Revenue from grants and Licensing agreements	$33	$90	$152	$326
Operating Expenses
Research and development	1,444	1,873	4,524	5,525
General & administrative	1,007	892	3,079	3,283
Total operating expenses	2,451	2,765	7,603	8,807
Loss from operations	(2,418)	(2,675)	(7,451)	(8,481)
Other income (expense)	(11)	(50)	(101)	(112)
Net loss	(2,429)	(2,725)	(7,551)	(8,593)
Dividend to preferred shareholders			47	165
Deemed dividend	170	320	1,658	960
Net loss applicable to common shareholders	($2,599)	($3,045)	($9,257)	($9,718)
Net loss per share applicable to common shareholders; basic and diluted	($0.08)	($0.12)	($0.30)	($0.40)
Weighted average shares - basic and diluted	33,824,249	25,120,608	30,666,932	24,568,766

StemCells Inc.
Condensed Consolidated Balance Sheets
	September 30,	December 31,
	2003	2002
(in thousands)	(unaudited)		(a)
Assets
Current assets:
Cash & cash equivalents	$4,170	$4,237
Other current assets	326	274
Total current assets	4,496	4,511
Property, plant & equipment, net	3,833	4,338
Other assets, net	2,792	2,480
Total assets	$11,121	11,329
Liabilities and stockholders equity
Current liabilities	$1,254	999
Non-current liabilities	3,609	3,882
Convertible preferred stock	1,830	2,660
Stockholdersí equity	4,428	3,788
Total liabilities, redeemable preferred stock and stockholdersí equity	$11,121	$11,329
(a) Derived from audited financial statements included in StemCells' annual report on form 10-K filed with the SEC.