StemCells Announces Third Quarter 2008 Financial Results

StemCells, Inc. (NASDAQ:STEM) today reported its financial results for the third quarter ended September 30, 2008.

The Company reported a net loss of $5,744,000, or $0.07 per share, for the third quarter ended September 30, 2008, compared to a net loss of $7,154,000, or $0.09 per share, for the third quarter of 2007. The decrease in net loss in 2008 compared to the same period in 2007 was primarily attributable to a decrease in external services, including costs related to manufacturing and testing of our cell products, as well as lower clinical trial costs. Total revenue for the third quarter of 2008 was $12,000, compared to $13,000 in the third quarter of 2007. Revenue for 2008 and 2007 was from licensing agreements.

Cash, cash equivalents, and marketable debt securities were $21,346,000 at September 30, 2008, compared with $43,294,000 at September 30, 2007. Cash used for operating activities in the third quarter of 2008 was $4,939,000 compared to $4,903,000 in the third quarter of 2007.

Significant recent events include:

• In July 2008, at our Annual Meeting of Stockholders, our stockholders approved an increase to our authorized capital by an additional 125,000,000 shares of common stock, increasing the number of authorized shares of capital stock from 126,000,000 total shares to 251,000,000 total shares. We subsequently amended our restated certificate of incorporation to designate an additional 125,000,000 shares of common stock, bringing the total number of authorized shares of common stock to 250,000,000. These securities may be used to raise additional capital to fund the company’s working capital and other corporate needs, for future acquisitions of assets, programs or businesses, and for other corporate purposes.
• In September 2008, Stewart Craig, Ph.D., joined us as Senior Vice President, Development and Operations. Dr. Craig is responsible for process design and engineering, GMP manufacturing operations, regulatory affairs, quality assurance, facilities and supply chain management. Dr. Craig has over 25 years of experience in the biotechnology sector, the last 15 of which have been in the cell therapy field. Dr. Craig was most recently Vice President and Chief Technology Officer of Progenitor Cell Therapy, LLC (PCT), a contract provider of GMP cell processing and development services. Prior to joining PCT, Dr. Craig was chief operating officer of Xcyte Therapies, Inc., a publicly traded cell-based immunotherapy company. Dr. Craig has also held senior management positions with the stem cell companies Osiris Therapeutics, Inc. and SyStemix, Inc.
• In October 2008, we were awarded a $305,000 grant from the National Institute of Diabetes and Digestive and Kidney Diseases to research and develop a potential cell-based therapeutic for liver disease arising from infection by the hepatitis C virus (HCV). Hepatitis C is a global health challenge, with approximately 170 million people affected worldwide and an estimated three million new infections each year. The virus targets liver cells and is a leading cause of end-stage liver disease. The grant will fund work over the next year to investigate whether our proprietary human liver engrafting cells (hLEC) can be made resistant to infection by the hepatitis C virus. This award is a Phase I grant under the Small Business Innovation Research (SBIR) Program of the National Institutes of Health. Should the objectives of the research funded by this grant be met, we anticipate applying for Phase II and additional funding under the SBIR Program.
• Also in October 2008, we announced preclinical results which show that our proprietary HuCNS-SC^® product candidate (purified human neural stem cells) can protect the retina from progressive degeneration. Retinal degeneration leads to loss of vision in diseases such as age-related macular degeneration and retinitis pigmentosa. In this study, our HuCNS-SC cells were transplanted into the Royal College of Surgeons (RCS) rat, a well established animal model of retinal degeneration, and were shown to have survived the transplant and engrafted, and the eyes transplanted with the cells showed preservation of photoreceptors and stabilization of visual function.

"The economic and financial environment has been very challenging for a long time now,” noted Martin McGlynn, President and Chief Executive Officer of StemCells, Inc. "Early on, we recognized the need to prioritize projects, reduce expenditures, manage headcount, and be as cost-efficient as possible. Our financial results and successes this quarter are testament to the proactive measures we have undertaken to manage our resources while still diligently pursuing our agenda.”

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.