Investigator in Phase I Clinical Trial for Batten Disease to Present at Lysosomal Disease Network World Symposium.

Dr. Robert Steiner to Outline Pre-Clinical Rationale and Clinical Trial Protocol 

PALO ALTO, Calif. -- Robert D. Steiner, M.D., F.A.A.P., F.A.C.M.G., will present at the Third Annual Lysosomal Disease Network World Symposium at 1:30 p.m. EST on Friday, December 8, 2006. This year's World Symposium will be held December 7-9, 2006 at Walt Disney World in Orlando, Florida.

Dr. Steiner is a lead investigator in the Phase I clinical trial sponsored by StemCells, Inc., (NASDAQ: STEM) which is designed to evaluate the safety and preliminary efficacy of HuCNS-SC[TM] as a treatment for infantile and late infantile neuronal ceroid lipofuscinosis (NCL). NCL, often referred to as Batten disease, is a rare and fatal neurodegenerative condition afflicting infants and children. Dr. Steiner's presentation, entitled "A Phase 1 Clinical Study of Human CNS Stem Cells (HuCNS-SC[TM]) in Patients with Neuronal Ceroid Lipofuscinosis", will highlight the rationale and pre-clinical data that suggest transplanting human neural stem cells may lead to a possible treatment for NCL. The first transplantation of HuCNS-SC into a patient in the trial took place November 14, 2006 at Oregon Health & Science University's (OHSU) Doernbecher Children's Hospital.

Dr. Steiner is vice chairman of pediatric research and head of the Division of Metabolism at Doernbecher Children's Hospital, and professor of Pediatrics and Molecular & Medical Genetics at OHSU School of Medicine. In addition to Dr. Steiner, the Phase I clinical trial is being led by Nathan Selden, M.D., Ph.D., F.A.C.S., F.A.A.P., Campagna Associate Professor of Pediatric Neurological Surgery and head of the Division of Pediatric Neurological Surgery, Doernbecher and OHSU School of Medicine and Thomas K. Koch, M.D., F.A.A.P., F.A.A.N., director of Pediatric Neurology and professor of Pediatrics and Neurology at Doernbecher and OHSU School of Medicine.

About Neuronal Ceroid Lipofuscinosis (Batten Disease)

Neuronal ceroid lipofuscinosis is a rare and fatal neurodegenerative disorder brought on by inherited genetic mutations. The disorder afflicts infants and young children, and the three most common forms of NCLCoinfantile, late infantile and juvenile onsetCoare often referred to as Batten disease. All forms have the same basic causeColack of a lysosomal enzymeCoand have similar progression and outcome. Children with NCL suffer seizures, progressive loss of motor skills, sight and mental capacity, eventually becoming blind, bedridden and unable to communicate.

In infantile and late infantile NCL, the disorder is brought on by inherited mutations in the CLN1 gene, which codes for palmitoyl-protein thioesterase 1 (PPT1) or in the CLN2 gene, which codes for tripeptidyl peptidase I (TPP-I), respectively. The consequence of these gene mutations is either a defective or missing enzyme that leads to accumulation of lipofuscin-like fluorescent inclusions in various cell types. These non-degraded lysosomal substrates accumulate to the point of interference with normal cellular and tissue function, and ultimately lead to the pathological manifestations of the disease. One way to treat the disease is to provide the brain with a replacement source of functional enzyme that can be taken up by the enzyme-deficient cells.

About HuCNS-SC[TM]

StemCells' human neural stem cells (HuCNS-SC) are a cell-based therapeutic prepared under controlled conditions. When HuCNS-SC are transplanted into the brain of a mouse model developed to mimic the human form of infantile NCL, the cells spread throughout the brain and produce the missing lysosomal enzyme. The enzyme level increases and continues to do so over time after the transplant. Thus, placement of HuCNS-SC in appropriate places in the brain provides the prospect of long-term delivery of the missing lysosomal enzyme. In laboratory studies, HuCNS-SC also produces the lysosomal enzyme missing in late infantile NCL, the other subtype being studied in the clinical trial. The production of both enzymes by HuCNS-SC provides a scientific rationale for enzyme replacement and cellular rescue in these two subtypes of NCL.

About the Clinical Trial

The Phase I trial is designed to evaluate the safety and preliminary efficacy of HuCNS-SC as a treatment of infantile and late infantile NCL. The trial is open label with two dose cohorts, and is expected to enroll six patients. Potential patients will be tested for eligibility and then evaluated for baseline disease status prior to transplantation of HuCNS-SC. In addition to measuring the safety of HuCNS-SC, patients enrolled in the study will be evaluated with standardized measures of development, cognition, behavior and language for one year following transplantation.

About StemCells, Inc.

StemCells, Inc. is a clinical-stage biotechnology company focused on the discovery, development and commercialization of cell-based therapeutics to treat diseases of the nervous system, liver and pancreas. The Company's programs seek to repair or repopulate neural, liver 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 cells are expandable into cell banks for therapeutic use, which offers the potential of using normal, non-genetically modified cells as cell-based therapies. StemCells has approximately 40 U.S. and 100 non-U.S. patents. Further information about the Company is available on its Web site at www.stemcellsinc.com.

About OHSU

Oregon Health & Science University is Oregon's only health and research university and its only academic health center. As Portland's largest employer and the fourth largest employer in Oregon (excluding government), OHSU's size contributes to its ability to provide many services and community support activities not found anywhere else in the state. It serves more than 184,000 patients, and is a conduit for learning for more than 3,900 students and trainees. OHSU is the source of more than 200 community outreach programs that bring health and education services to each county in the state.

As a leader in research, OHSU earns $274 million annually in research funding. The institution serves as a catalyst for the region's bioscience industry and is an incubator of discovery, averaging one new breakthrough or innovation every four days. OHSU disclosed 101 inventions in 2005 alone and has helped start 57 new spin-off companies, most of which are based in Oregon.

About Doernbecher Children's Hospital

Doernbecher Children's Hospital, an integral part of Oregon Health & Science University, is a world-class academic health center that each year cares for more than 56,000 patients from across the United States. In the most patient- and family-centered environment, children from all corners of the country receive outstanding cancer treatment, specialized neurology care, highly sophisticated heart surgery, and care in many other pediatric specialties. In addition to multiple locations in the Portland metropolitan area, Doernbecher's pediatric experts travel around Oregon and southwest Washington providing pediatric specialty care through 13 outreach clinics.

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") and its ability to conduct clinical trials as well as its research and product development efforts. 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 whether results obtained in the animal models and in vitro studies of infantile NCL or other diseases and conditions will be able to be translated into treatment for humans; uncertainty as to whether HuCNS-SC will prove safe in the current clinical trial; uncertainty as to whether the current trial will provide any information about the possible efficacy of HuCNS-SC in treating NCL; uncertainty as to whether the FDA or other applicable regulators or review boards 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 technology; uncertainties regarding the timing and duration of any clinical trials; 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 research and development programs will prove safe and clinically effective and not cause tumors or other side effects; uncertainty 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 the Company's Annual Report on Form 10-K.