StemCells, Inc. Issues FDA Update on Proposed Clinical Trial

PALO ALTO, Calif.--(BUSINESS WIRE)--March 31, 2005--StemCells, Inc. (NASDAQ: STEM) today announced recent, positive progress towards its goal of initiating Phase I clinical testing of its proprietary neural cell therapy product - hCNS-SC - in Batten disease.

On February 1, 2005, StemCells announced that the U.S. Food and Drug Administration (FDA) had orally informed it that the proposed trial had been placed on clinical hold. On February 25, 2005, the Company received a letter from the FDA confirming that fact and detailing the Agency's specific comments, questions and requests for additional information.

"In the last 30 days we believe there has been positive and gratifying progress made between StemCells and the FDA," said Martin McGlynn, chief executive officer of StemCells. "After a thorough evaluation of the FDA's questions and concerns we met with the Center for Biologic's Evaluation and Research (CEBR) Clinical Hold Oversight Committee. I would characterize the dialogue from the FDA as informed, supportive and encouraging. Our next step is to prepare an amendment to our original IND filing and re-submit it to the FDA. We are hard at work on this already, and intend to continue to be in active and ongoing dialogue with the FDA throughout the process."

"We are sensitive to and appreciate the care with which the FDA is reviewing our IND for this trial," continued McGlynn. "We are in agreement with the FDA that frequent discussion between the company and the Agency is the best course of action given the ground-breaking nature of our proposed clinical trial."

If approved by the FDA, the proposed study would mark the first-ever FDA-approved clinical trial to use a purified composition of human neural stem cells as the potential therapeutic agent. The Phase I trial is designed to investigate the safety of hCNS-SC in the treatment of infantile and late-infantile neuronal ceroid lipofuscinosis (NCL), the most severe forms of a group of disorders commonly referred to as Batten disease.

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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 more than 40 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 Company's beliefs regarding the progress made in its discussions with the FDA, attitudes expressed by the FDA and expectations regarding FDA actions and the Company's response to these actions, the Company's ability to resolve questions raised by the FDA and to initiate clinical trials, the timing of such trials, and other future operations of 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 uncertainty as to whether the FDA will remove the clinical hold on the Company's proposed initial clinical trial and permit the Company to proceed to clinical testing despite the novel and unproven nature of the Company's technology; uncertainties regarding the Company's ability to satisfy the FDA's concerns, if at all, or without conducting extensive and time consuming additional preclinical studies; uncertainty whether the FDA may at some point raise other concerns not included in its written notification to the Company of the clinical hold on the proposed trial; the risk that, even if approved, the Company's initial clinical trial could be substantially delayed beyond its expected dates; 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 uncertainty regarding the outcome of the Phase I clinical trial and any other trials the Company may conduct in the future; the uncertainty regarding the validity and enforceability of issued patents; the uncertainty whether any products that may be generated 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 the Company's Annual Report on Form 10-K under the heading "Cautionary Factors Relevant to Forward-Looking Statements."

    CONTACT: StemCells, Inc.
             Judi Lum, 650-475-3100
             or
             Schwartz Communications, Inc.
             781-684-0770
             stemcells@schwartz-pr.com

    SOURCE: StemCells, Inc.

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