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StemCells, Inc. Demonstrates Protection of Neurological Function in Batten Mouse.

Preclinical Proof-of-Concept Data for the Company's Neural Stem Cells Published in Cell Stem Cell

PALO ALTO, Calif. -- StemCells, Inc. (NASDAQ:STEM) today announced the publication of preclinical data demonstrating for the first time that transplantation of its proprietary, purified human neural stem cells delays the loss of motor function in a mouse model of infantile neuronal ceroid lipofuscinosis (NCL). NCL, commonly referred to as Batten disease, is a fatal neurodegenerative disorder in children. This paper, "Neuroprotection of Host Cells by Human Central Nervous System Stem Cells in a Mouse Model of Infantile Neuronal Ceroid Lipofuscinosis," was published online today in the peer-reviewed journal Cell Stem Cell, and will be featured in the September 2009 print edition.

The study highlights StemCells' novel neuroprotective approach to treating neurodegenerative diseases and the therapeutic potential of its neural stem cells. In this research, these cells were transplanted in a mouse model of infantile NCL and compared to a control (non-transplanted) group. The results demonstrate that the transplanted cells engraft, migrate throughout the brain and continuously secrete the missing lysosomal enzyme characteristic of NCL, which is needed to process cellular waste and keep neurons functioning and healthy. Compared with the control group, the mice that received the transplanted neural stem cells showed statistically significant reduction in cellular waste build-up, protection of critical host neurons and delayed loss of motor function.

"These exciting results suggest the prospect for improving the quality of life in patients suffering from NCL, and provide additional preclinical support for the development of our neural stem cells in this disease," stated Stephen Huhn MD, FACS, FAAP, Vice President and Head of the CNS Program at StemCells, Inc. "We are encouraged to continue our clinical development efforts with the hope of one day achieving a breakthrough in treating neurodegenerative diseases like NCL, which today have no cure."

The study was conducted by researchers at StemCells, Inc., led by Nobuko Uchida, Ph.D., Vice President of the Company's Stem Cell Biology Program, in collaboration with leading researchers in genetics, neurology and stem cell biology at King's College London, the Stanford University School of Medicine and The Salk Institute for Biological Studies. The neural stem cells used in the study were supplied by StemCells, Inc.

StemCells is currently testing its neural stem cell product candidate, HuCNS-SC([R]) cells, in clinical trials. The Company completed a Phase I trial in NCL in January 2009, the results of which demonstrated a favorable safety profile along with evidence of engraftment and long-term survival of the HuCNS-SC cells. StemCells has also received approval from the U.S. Food and Drug Administration (FDA) to initiate a Phase I trial of its HuCNS-SC cells to treat Pelizaeus-Merzbacher Disease (PMD), a fatal myelination disorder in the brain that primarily affects young children.

About Neuronal Ceroid Lipofuscinosis (Batten Disease)

Neuronal ceroid lipofuscinosis (NCL) is a fatal neurodegenerative disorder that afflicts infants and young children. The disorder, often referred to as Batten disease, is caused by genetic mutations, and children who inherit the defective gene are unable to produce enough of an enzyme that processes cellular waste substances that accumulate in a part of cells known as the lysosome. Without the enzyme, the cellular waste builds up, and eventually the cells cannot function and die. Children with NCL appear healthy when born, but as their brain cells die, they begin to suffer seizures and progressively lose motor skills, sight and mental capacity. Eventually, they become blind, bedridden and unable to communicate or function independently. There currently is no cure for the disease. The infantile and late infantile forms of NCL are caused by different genetic mutations. As the names imply, the two forms begin to afflict patients at different stages of infancy, but both have similar disease progression and outcomes.

About HuCNS-SC([R]) Cells

StemCells' lead product candidate, HuCNS-SC cells, is a highly purified composition of tissue-derived human neural stem cells that are expanded and stored as banks of cells. The Company's preclinical research has shown that HuCNS-SC cells can be directly transplanted; are able to engraft, migrate, and differentiate into neurons and glial cells; and possess the ability to survive for as long as one year with no sign of tumor formation or adverse effects. These findings show that HuCNS-SC cells, when transplanted, act like normal stem cells, suggesting the possibility of a continual replenishment of normal human neural cells.

About StemCells, Inc.

StemCells, Inc. is focused on the development and commercialization of cell-based technologies. In its therapeutic product development programs, StemCells is targeting diseases of the central nervous system and liver. StemCells' lead product candidate, HuCNS-SC([R]) cells (purified human neural stem cells), is in clinical development for the treatment of two fatal neurodegenerative disorders that primarily affect young children. StemCells also markets specialty cell culture media products under the brand SC Proven([R]), and is developing its cell-based technologies for use in drug discovery and development. The Company has exclusive rights to approximately 55 issued or allowed U.S. patents and approximately 200 granted or allowed non-U.S. patents. Further information about StemCells is available on its web site at www.stemcellsinc.com.

Apart from statements of historical fact, the text of this press release constitutes forward-looking statements regarding, among other things, the therapeutic potential of the Company's human neural stem cells and the prospects for future commercialization of a product to treat neurodegenerative diseases. These forward-looking statements speak only as of the date of this news release. The Company 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: uncertainties with respect to the fact that additional trials will be required to confirm the safety and demonstrate the efficacy of the Company's HuCNS-SC cells for the treatment of NCL or any other disease; risks whether the FDA or other applicable regulatory agencies will permit the Company to continue clinical testing in NCL, PMD 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 about the design of future clinical trials and whether the Company will receive the necessary support of a clinical trial site and its institutional review board to pursue future clinical trials in NCL, PMD or in proposed therapies for other diseases or conditions; uncertainties regarding the Company's ability to obtain the increased capital resources needed to continue its current and planned research and development operations, including such operations of the Company for non-therapeutic applications, and to conduct the research, preclinical development and clinical trials necessary for regulatory approvals; uncertainty as to whether HuCNS-SC cells 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 whether results in preclinical research in animals will be indicative of future clinical results in humans; uncertainties regarding the Company's manufacturing capabilities given its increasing preclinical and clinical commitments; and other factors that are described under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2008 and in its subsequent reports on Form 10-Q and Form 8-K.
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Date:Sep 3, 2009
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