StemCells Announces Second Quarter 2008 Financial Results

PALO ALTO, Calif.--(Business Wire)--
StemCells, Inc. (NASDAQ:STEM) today reported its financial results
for the second quarter ended June 30, 2008.

The Company reported a net loss of $6,715,000, or $0.08 per share,
for the second quarter ended June 30, 2008, compared to a net loss of
$5,424,000, or $0.07 per share, for the second quarter of 2007. The
increase in net loss from 2007 to 2008 was primarily attributable to
higher legal fees for patent prosecution and litigation, loss of
tenant income to offset operating expenses for the Company's vacant
pilot manufacturing facility in Rhode Island, and lower interest
income attributable to lower average cash balances and lower yield on
investments in 2008. Total revenue for the second quarter of 2008 was
$30,000, compared to $8,000 in the second quarter of 2007. Revenue for
2008 and 2007 was from licensing agreements.

Cash, cash equivalents, and marketable debt securities were
$26,203,000 at June 30, 2008, compared with $49,182,000 at June 30,
2007. Cash used for operating activities in the second quarter of 2008
was $4,935,000 compared to $4,854,000 in the second quarter of 2007.
Also in the second quarter of 2008, Progenitor Cell Therapy, LLC (PCT)
prepaid a $1.0 million loan that the Company had advanced in
connection with discussions about the possible acquisition of PCT.

Significant recent events include:

-- In April 2008, the U.S. Patent and Trademark Office (PTO)
issued U.S. Patent Number 7,361,505 with broad claims covering
human neural stem cells derived from any tissue source,
including embryonic, fetal, juvenile, or adult tissue. The
'505 patent is exclusively licensed to StemCells.

-- Also in April 2008, the PTO upheld two of the Company's other
neural stem cell patents, (U.S. Patent Number 5,851,832 and
U.S. Patent Number 6,497,872), as amended, in reexamination
proceedings that commenced in 2007. The patents are two of
four patents which are the basis of one the Company's two
patent infringement suits against Neuralstem, Inc.

-- In June 2008, the PTO issued to the Company U.S. Patent No.
7,381,561 with claims covering the use of monoclonal
antibodies for the prospective isolation of rare cells from
human neural tissue, such as the Company's HuCNS-SC(R) product
candidate (purified human neural stem cells).

-- In June 2008, the Company filed with the U.S. Securities and
Exchange Commission (SEC) a shelf registration statement, to
issue up to $100 million worth of registered debt and equity
securities. The shelf was declared effective by the SEC in
July and gives the Company the flexibility to issue registered
securities, from time to time, in one or more separate
offerings or other transactions with the size, price and terms
to be determined at the time of issuance. Also in July, the
Company deregistered the remaining unissued shares available
under the Company's shelf registration statement filed in
October 2005.

Apart from statements of historical fact, the text of this press
release constitutes forward-looking statements regarding, among other
things, the future business operations of StemCells, Inc. (the
"Company") and its ability to conduct clinical trials as well as its
research and product development efforts. These 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 such forward-looking statements due to risks and uncertainties to
which the Company is subject, including uncertainty as to whether the
FDA or other applicable regulatory agencies will permit the Company to
continue clinical testing in NCL or in future clinical trials of
proposed therapies for other diseases or conditions despite the novel
and unproven nature of the Company's technologies; uncertainties
regarding the Company's ability to obtain the increased 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; uncertainty
regarding the validity and enforceability of the Company's patents;
uncertainty as to whether HuCNS-SC and any products that may be
generated in the future in the Company's cell-based programs will
prove safe and clinically effective and not cause tumors or other
adverse side effects; uncertainties regarding the Company's
manufacturing capabilities given its increasing pre-clinical and
clinical commitments; uncertainties as to whether the Company will
achieve revenues from product sales or become profitable; and other
factors that are described under the heading "Risk Factors" in Item 1A
of Part II of the Company's Annual Report on Form 10-K.

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StemCells, Inc.
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Unaudited Condensed Consolidated Statement of Operations
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(in thousands, except share and per share amounts)
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Three months ended Six months ended
--------------------- ---------------------
June 30, June 30,
--------------------- ---------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
Revenue from licensing
agreements $30 $8 $47 $13
Operating Expenses
Research and
development 4,416 4,498 8,915 8,517
General and
administrative 2,346 1,409 4,600 3,673
Wind-down expenses
related to our former
corporate headquarters 167 134 328 356
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Total operating expenses 6,929 6,041 13,843 12,546
Loss from operations (6,899) (6,033) (13,796) (12,533)
Other income (expense)
License and settlement
agreement, net - - - 550
Realized gain on sale
of marketable
securities - - - 718
Interest Income 216 655 599 1,309
Other income (expense) (32) (46) (64) (88)
-------------------------------------------
Total other income
(expense) 184 609 535 2,489
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Net loss ($6,715) ($5,424) ($13,261) ($10,044)
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Net loss per share -
basic and diluted ($0.08) ($0.07) ($0.16) ($0.13)
Weighted average shares -
basic and diluted 80,814,838 79,787,273 80,759,400 79,180,107
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StemCells, Inc.
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Unaudited Condensed Consolidated Balance Sheets
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June 30, December 31,
-------------------------
2008 2007
(in thousands) (a)
Assets
Current assets:
Cash & cash equivalents $18,593 $9,759
Marketable securities 7,611 26,697
Other current assets 955 2,297
-------------------------
Total current assets 27,159 38,753
Marketable securities 552 3,151
Property, plant & equipment, net 3,634 3,905
Other assets, net 2,440 2,473
-------------------------
Total assets $33,785 $48,282

Liabilities and stockholders' equity
Current liabilities 4,869 6,138
Non-current liabilities 6,219 6,932
Stockholders' equity 22,697 35,212
-------------------------
Total liabilities and stockholders' equity $33,785 $48,282
-------------------------

(a) Derived from audited financial statements included in StemCells'
annual report on form 10-K filed with the SEC.
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StemCells, Inc.
Rodney Young, 650-475-3100 ext. 105
Chief Financial Officer
irpr@stemcellsinc.com

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