StemCells Comments on Passage of California Proposition 71; Company Supports Stem Cell Research and Cures Initiative

PALO ALTO, Calif.--(BUSINESS WIRE)--Nov. 4, 2004--StemCells, Inc. (NASDAQ:STEM) today commented on the passage of California State Proposition 71 (Prop. 71), the California Stem Cell Research and Cures Initiative, praising the Initiative's intention to encourage stem cell research in the State of California, and to finance such research with State funds of approximately $295 million annually for 10 years beginning with 2005.

"The passage of Proposition 71 is an important event both for California academic institutions and researchers engaged in or looking to play a role in stem cell science, and for California companies undertaking stem cell research. It is our understanding that the California Institute for Regenerative Medicine, to be created under the Initiative, will provide grants to advance embryonic stem cell research as well as adult stem cell research, which is the current and exclusive focus at StemCells, Inc.," said Martin McGlynn, President and Chief Executive Officer of StemCells.

"Certainly, much work remains to be done to unlock the therapeutic value of stem cells, and the funds generated by this Initiative will be a shot in the arm for stem cell research not supported by the federal government. Not only will Prop. 71 help California build upon its leadership in the field, but we believe it will encourage young scientists to pursue careers in stem cell biology and related fields in California, which is critical to the future health of our industry. The State's commitment to supporting stem cell research also may attract leading scientists in the field to California," he added.

The Company noted that details are not yet final regarding the formation of the California Institute for Regenerative Medicine or the process for applying for grants. "The process will be a competitive one. As a company operating in California since 1995 and as a leader in tissue-derived stem cells, we intend to compete for our fair share," said Mr. McGlynn.

Current White House restrictions on use of federal funds to support embryonic stem cell research does not change the work StemCells, Inc. is doing with adult stem cells, and it is "business as usual" for the Company with the continuation of the current Administration. StemCells, Inc. remains eligible for federal government support due to its focus on adult stem cells, as well as for funds under Prop. 71.

"Our R&D programs, all of which concentrate on diseases of, or injury to, the central nervous system, the liver and the pancreas, have been funded primarily by our shareholders, rather than by the public sector. We appreciate the National Institute of Health (NIH) grants that assist research in the use of our cells for various diseases and conditions such as Alzheimer's disease and spinal cord injuries, but we do not rely on them," commented Mr. McGlynn. "As a publicly traded company that recently raised additional capital, we expect to complete our first clinical trial without dependence on state or federal funds."

As previously announced, StemCells has sufficient cash to take the planned Phase I clinical trial for Batten disease through trial recruitment, study monitoring, data analysis and patient follow-up, as well as support the planned filing in 2005 of a second Investigational New Drug (IND) application for another central nervous system indication. The commencement of the Batten's trial remains subject to U.S. Food and Drug Administration approval of StemCells' first IND, which the Company plans to file by the first quarter of 2005. Assuming approval, the trial will investigate the safety of transplanting the Company's patented human neural stem cells (hCNS-SC) in neuronal ceroid lipofuscinoses patients, and determine if the transplanted cells secrete the missing lysosomal enzymes in the brain and alter some characteristics and clinical course of the disease.

About Batten Disease

The neuronal ceroid lipofuscinoses (NCLs) are a group of rare genetic disorders affecting children, generally known as Batten disease. In patients with Batten disease, particular housekeeping enzymes normally secreted in the brain are either defective or missing, as a result of gene mutations. Lack of the enzyme causes a buildup of toxic waste (aggregates of lipids and proteins called lipofuscin) primarily in the brain and leads to the death of neurons. Children with Batten disease suffer seizures and the progressive loss of motor skills, sight and mental capacity, eventually becoming blind, bedridden and unable to communicate. Today, Batten disease is always fatal.

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About StemCells, Inc.
StemCells, Inc. is a development stage 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. StemCells is the first company to directly identify and isolate human neural stem cells from normal brain tissue. These stem cells are expandable into cell banks for therapeutic use, which demonstrates the feasibility of using normal, non-genetically modified cells as cell-based therapies. StemCells is the only publicly traded company solely focused on stem cell research and development and has approximately 39 U.S. and 100 non-U.S. patents, as well as 100 patent applications pending worldwide. 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 be able to file an IND in the time it projects and whether the FDA will permit it to proceed to clinical testing; the uncertainty regarding the validity and enforceability of issued patents; 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 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 titled "Cautionary Factors Relevant to Forward-Looking Statements."

    CONTACT: StemCells, Inc.
             Martin McGlynn, 650-475-3100
             or
             Investor Relations
             Lippert/Heilshorn & Associates
             Bruce Voss or Brandi Floberg, 310-691-7100
             bfloberg@lhai.com

    SOURCE: StemCells, Inc.

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