News & Events > Press Releases > May 2, 2005

StemCells Announces First Quarter 2005 Financial Results

PALO ALTO, Calif.--(BUSINESS WIRE)--May 2, 2005--StemCells, Inc.
(NASDAQ: STEM) today reported its financial results for the first
quarter ended March 31, 2005.

The Company reported a net loss of $3,449,000, or $0.06 per share, for the first quarter ended March 31, 2005, compared to a net loss of $2,771,000, or $0.07 per share, for the first quarter ended March 31, 2004. Total revenue for the first quarter of 2005 and 2004 was $35,000 and $93,000 respectively. Revenue for 2005 and 2004 was primarily from grants and licensing agreements. Cash and cash equivalents were $37,405,000 at the end of March 31, 2005, compared with $10,346,000 at the end of March 31, 2004.

The increase in net loss from 2004 to 2005 for the quarter reported, was primarily attributable to the cost of external services incurred in the evaluation and testing of our internal financial control systems so as to meet the requirements of and be in compliance with the Securities and Exchange Commission rules issued under section 404 of the Sarbanes-Oxley Act, costs related to an increase in head count and related recruiting costs, and the effect of increasing our estimated reserve for the exit cost obligation related to our former corporate headquarters in Rhode Island.

"As we have previously announced, the Company has filed an Investigational New Drug application (IND) with the U.S. Food and Drug Administration (FDA), to begin a clinical trial of our human neural stem cells for the treatment of Batten disease, a rare and fatal neurodegenerative genetic condition afflicting infants and children," said Martin McGlynn, chief executive officer of StemCells. "That trial is on clinical hold, pending our response to questions and concerns presented to us by the FDA earlier this year. Our primary focus has been and will continue to be the preparation of an amendment to our initial IND filing in response to those questions and concerns, so that our application can be taken off of clinical hold. We continue to work cooperatively with the FDA in this regard and I would anticipate submitting the amendment during the third quarter of this fiscal year."

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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, financial resources needed to 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 financial ability to continue its current research and development operations and to conduct the research and its ability to obtain the additional capital resources needed to do so, 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."

                            StemCells,Inc.
            Condensed Consolidated Statement of Operations
          (in thousands, except share and per share amounts)

                                                    Three months ended
                                                         March 31,
                                                     2005        2004

Revenue from grants and licensing agreements          $35         $93
Operating Expenses
 Research and development                           1,825       1,868
 General & administrative                           1,299         864
 Wind-down expenses related to our former
  corporate headquarters                              521         131
Total operating expenses                            3,645       2,863
Loss from operations                               (3,610)     (2,770)
Other income (expense)                                161          (1)
Net loss applicable to common shareholders        ($3,449)    ($2,771)
Net loss per share applicable to common
 shareholders; basic and diluted                   ($0.06)     ($0.07)
Weighted average shares - basic and diluted    62,406,725  41,010,068


                           StemCells, Inc.
                 Condensed Consolidated Balance Sheets

                                              March 31,   December 31,
                                                 2005         2004
(in thousands)                               (unaudited)       (a)
Assets
Current assets:
   Cash & cash equivalents                     37,405        41,060
   Other current assets                           803           390
Total current assets                           38,208        41,450
Property, plant & equipment, net                3,243         3,424
Other assets, net                               2,717         2,753
Total assets                                   44,168        47,627
Liabilities and stockholders' equity
Current liabilities                             2,788         3,383
Non-current liabilities                         7,303         7,295
Stockholders' equity                           34,077        36,949
Total liabilities and stockholders' equity     44,168        47,627

(a) Derived from audited financial statements included in StemCells'
    annual report on form 10-K filed with the SEC.


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

    SOURCE: StemCells, Inc.