CytoTherapeutics Acquires StemCells, Inc.

PROVIDENCE, RI, September 26, 1997 -- CytoTherapeutics, Inc. (Nasdaq: CTII) today acquired StemCells, Inc. (SCI) of San Diego, California for $7.9 million in newly issued shares of CytoTherapeutics' Common Stock at $5.00 per share. After the closing, the Company had approximately 18.2 million shares outstanding. Simultaneously with the acquisition of SCI, Richard M. Rose, M.D., became President, Chief Executive Officer and a Director of CytoTherapeutics. The Company previously announced the proposed acquisition of SCI on August 14, 1997.

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CytoTherapeutics, Inc. is a leader in the development of cell-based therapeutics. The Company's encapsulated-cell technology is designed to treat a number of serious diseases and disorders of the central nervous system (CNS), including chronic pain, by delivering therapeutic proteins directly to the CNS. 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. Through its 50%-owned Swiss subsidiary, Modex Therapeutiques SA, the Company is also developing its encapsulated-cell treatments for diabetes, obesity and blood disorders. For additional information, visit the company's Internet web site at http://www.cyto.com.