StemCells, Inc. Announces First Human Neural Stem Cell Transplant in Landmark Myelination Disorder Trial

Phase I Study Targets "Communication Highway" of the Brain in Children With PMD

PALO ALTO, CA, USA | February 10, 2010 | StemCells, Inc. (Nasdaq:STEM) announced today that its proprietary HuCNS-SC(R) human neural stem cells have been used to treat the first patient enrolled in its Phase I clinical trial in Pelizaeus-Merzbacher Disease (PMD), a myelination disorder that afflicts male children. The stem cells were administered yesterday at the University of California, San Francisco (UCSF) Children's Hospital by direct injection into the brain of a patient with connatal PMD, the most severe form of the disease. This marks the first time that neural stem cells have been transplanted as a potential treatment for a myelination disorder, and the second clinical trial involving the use of HuCNS-SC cells in a neurodegenerative disease.

Myelin is the substance that surrounds and insulates nerve cells' communications fibers (also known as axons). Without sufficient myelination, these fibers are unable to properly transmit nerve impulses, leading to a progressive loss of neurological function. Multiple sclerosis, transverse myelitis and certain types of cerebral palsy are more commonly known myelination disorders that also affect the central nervous system. Patients with PMD are born with a defective gene, which leads to insufficient myelin in the brain. Those with the most severe form of the disease, connatal PMD, lose the ability to walk and talk and eventually die, often before the age of 10. Currently, there are no effective treatments for PMD.

Stephen Huhn MD, FACS, FAAP, Vice President and Head of the CNS Program at StemCells, Inc., said, "The dosing of this first patient marks the beginning of a new chapter in the search for novel approaches to treat PMD and other myelination disorders. Cell therapy represents hope for those with diseases that small molecules and other biologics have been unable to address. Our ultimate goal in this clinical development program is to improve the outlook for these patients by establishing the basis for a safe and effective treatment option that could significantly slow or prevent the progression of the disease. While the primary focus in this first trial is safety, we will also be looking for evidence of new myelin formation in the patients' brains following the transplantation of our cells, as well as any signs of improved neurological function."

President and CEO Martin McGlynn stated, "We are extremely grateful to the family of this child, and to the clinicians and staff at UCSF, for bringing us one step closer to our goal of realizing a cell-based treatment for devastating myelination disorders that impact the central nervous system."

The trial is being directed by a team of prominent researchers at UCSF Children's Hospital, one of the leading medical centers in the United States for neonatology, pediatric neurology and neurosurgery. The principal investigator is David H. Rowitch, M.D., Ph.D., Chief of Neonatology at UCSF Children's Hospital, Professor of Pediatrics and Neurological Surgery, member of the Eli and Edythe Broad Center of Regeneration Medicine and Stem Cell Research, and a Howard Hughes Medical Institute investigator. The study co-investigators are Nalin Gupta, M.D., Ph.D., Chief of Pediatric Neurological Surgery, and Jonathan B. Strober, M.D., Director of Clinical Services for Child Neurology and Director of the Muscular Dystrophy Clinic at UCSF Children's Hospital.

About the PMD Clinical Trial

The Phase I trial is designed to assess the safety and preliminary effectiveness of HuCNS-SC cells as a potential treatment for PMD. The trial is expected to enroll four patients with connatal PMD. All patients will be transplanted with HuCNS-SC cells, and will be immunosuppressed for nine months. Following transplantation, the patients will be evaluated regularly over a 12-month period in order to monitor and evaluate the safety and tolerability of the HuCNS-SC cells, the surgery, and the immunosuppression. In addition, magnetic resonance imaging (MRI) of the brain post-transplant may enable the measurement of new myelin formation. As the Company intends to follow the effects of this therapy long-term, a separate four-year observational study will be initiated at the conclusion of this trial. Interested parties may find more information on patient enrollment at http://neonatology.ucsf.edu/nbri/pmd-trial/ or by visiting www.stemcellsinc.com. Additional information about this clinical trial can also be found at www.clinicaltrials.gov.

About HuCNS-SC Cells

StemCells' lead product candidate, HuCNS-SC cells, is a highly purified composition of 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 in the central nervous system. The transplanted cells are able to engraft, migrate, 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, behave like normal stem cells, suggesting the possibility of a continual replenishment of normal human neural cells.

Preclinical studies performed by StemCells and its collaborators provide a rationale for potential therapeutic use of HuCNS-SC cells in myelination disorders. The Company has demonstrated that, when transplanted into an animal model of hypomyelination (shiverer mouse), HuCNS-SC cells engraft and differentiate into mature, specialized cells called oligodendrocytes, and form myelin sheaths around host nerve fibers. The initial myelination data in the shiverer mouse was published in the Proceedings of the National Academy of Science (Cummings, et al. 2005) and the results of additional myelination studies were presented at the International Society of Stem Cell Research (ISSCR) 2008 Annual Meeting in Philadelphia.

StemCells has completed a Phase I clinical trial of its HuCNS-SC cells for the treatment of Neuronal Ceroid Lipofuscinosis (NCL), a fatal brain disorder in children. Data from this trial demonstrated the clinical safety and tolerability of these cells. The Company's HuCNS-SC cells are also in preclinical development for other central nervous system disorders, including retinal degenerative diseases, such as age-related macular degeneration and retinitis pigmentosa, and spinal cord injury.

About UCSF

One of the nation's top children's hospitals, UCSF Children's Hospital creates an environment where children and their families find compassionate care at the healing edge of scientific discovery, with more than 150 experts in 50 medical specialties serving patients throughout Northern California and beyond. The hospital admits about 5,000 children each year, including 2,000 babies born in the hospital. Medi-Cal patients constitute more than half of the patient population.

UCSF is a leading university dedicated to promoting health worldwide through advanced biomedical research, graduate-level education in the life sciences and health professions, and excellence in patient care.

About StemCells, Inc.

StemCells, Inc. is focused on the development and commercialization of cell-based technologies. In its cellular medicine programs, StemCells is targeting diseases of the central nervous system and liver. StemCells' lead product candidate, HuCNS-SC 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 products under the brand SC Proven(R), and is developing its cell-based technologies for use in drug screening and drug 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 at www.stemcellsinc.com.

SOURCE: StemCells, Inc.

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