Rodney Young Chief Financial Officer (510) 456-4128 STEMCELLS, INC. PROVIDES BUSINESS UPDATE AND REPORTS THIRD QUARTER 2011

STEMCELLS, INC. PROVIDES BUSINESS UPDATE AND REPORTS THIRD QUARTER 2011 FINANCIAL RESULTS

NEWARK, Calif., November 1, 2011 StemCells, Inc. (NASDAQ: STEM), a leading stem cell company

developing and commercializing novel cell-based therapeutics and tools for use in stem cell-based research and drug discovery, today provided a business update and reported financial results for the third quarter ended September 30, 2011.

As our quarterly results show, we are making real progress in containing our expenses and cash

burn, and I am pleased to report that we are also making significant progress in the clinic with our HuCNS-SC

cells, said Martin McGlynn, President and CEO of StemCells, Inc. We successfully dosed the first patient in our spinal cord injury trial and are on track to complete dosing of the first patient cohort this year. In our PMD trial, we have

conducted a review of interim data with the clinical investigators at UCSF and are cautiously optimistic that changes we are seeing in patient MRIs are consistent with early development of new myelin in the regions in which the cells were

transplanted. Obviously, we must await the final results of the trial before definitive conclusions can be drawn. I am also pleased to report that there have only been two SAEs in this trial to date, both of which appear unrelated to the cells or

the procedure. We anticipate being able to report final study results in Q2 of next year.

Third Quarter and Recent Business

Therapeutic Product Development

Tools and Technologies Programs

Other Business Activities

Third Quarter Financial Results

For the third quarter of 2011, the Company

reported a net loss of $4,334,000, or $(0.31) per share, compared with a net loss of $5,552,000, or $(0.44) per share, for the third quarter of 2010. Loss from operations in the third quarter of 2011 was $6,163,000, which was 12% lower when compared

to the $7,001,000 loss from operations in the third quarter of 2010.

Total revenue during the third quarter of 2011 was

$224,000, compared to $254,000 in the same period of 2010. Revenue from product sales in the third quarter of 2011 was $182,000, which was a 40% increase compared to the same period of 2010. This growth was driven by both increased unit volumes and

new product launches in the Company s SC Proven media and reagents business. Revenue from licensing agreements and grants was $41,000, which was a 67% decrease compared to the previous year primarily due to the completion and termination of

several projects funded by grants.

Total operating expenses in the third quarter of 2011 were $6,326,000, compared to

$7,218,000 in the third quarter of 2010. In the third quarter of 2011, selling, general and administrative expenses totaled $1,733,000, which was a 14% decrease compared to the same period of 2010, while research and development expenses totaled

$4,524,000, or 13% lower than in the third quarter of 2010. The significant reduction in operating expenses quarter over quarter was primarily attributable to the reduction in force effected in May 2011.

Other income in the third quarter of 2011 was $1,829,000, compared to $1,449,000 in the

third quarter of 2010. This increase was primarily due to a decrease in the estimated fair value of warrant liability.

cash equivalents and marketable securities at September 30, 2011 totaled $12,534,000, compared with $19,899,000 at December 31, 2010. For the nine-month period ended September 30, 2011, net cash used in operating activities was

$16,846,000, which was 14% lower than the same period in 2010.

StemCells will host a live conference call and webcast today, November 1, at 4:30 PM Eastern Time (1:30 PM Pacific Time) to discuss

its financial results and recent business activities. Interested parties are invited to listen to the call over the Internet via the Investors section of the Company s website at

http://investor.stemcellsinc.com/phoenix.zhtml?c=86230&p=irol-irhome. An archived version of the webcast will be available for replay on the Company s website beginning approximately two hours following the conclusion of the live

call and continuing for a period of 30 days.

About StemCells, Inc.

StemCells, Inc. is engaged in the research, development, and commercialization of cell-based therapeutics and tools

for use in stem cell-based research and drug discovery. The Company s lead therapeutic product candidate,

HuCNS-SC cells (purified human neural stem cells), is currently in development as a potential treatment for a

broad range of central nervous system disorders. Clinical trials are currently underway in spinal cord injury and in Pelizaeus-Merzbacher disease (PMD), a fatal myelination disorder in children. In addition, the Company plans to file an IND by

year-end 2011 to initiate a clinical trial of HuCNS-SC cells in the dry form of age-related macular degeneration, and is also pursuing preclinical studies of its HuCNS-SC cells in Alzheimer s disease and stroke. StemCells also markets stem cell

research products, including media and reagents, under the SC Proven brand, and is developing stem cell-based

assay platforms for use in pharmaceutical research, drug discovery and drug development. Further information about StemCells is available at http://www.stemcellsinc.com.

Apart from statements of historical fact, the text of this press release constitutes forward-looking statements within the meaning of

the U.S. securities laws, and is subject to the safe harbors created therein. These statements include, but are not limited to, statements regarding the future business operations of StemCells, Inc. (the Company ); the timing and prospect

associated with beginning to detect potential clinical benefit from the use of the Company s HuCNS-SC cells; the prospect for continued clinical development of the Company s HuCNS-SC cells in CNS disorders; the prospect for growth in the

Company s product sales; the timing and nature of the final data from the Company s Phase I clinical study in PMD; the timing of patient dosing and possible outcomes of the Company s Phase I/II clinical study in spinal cord

injury; the Company s ability to apply for, and possibly secure in 2012, funding from the California Institute of Regenerative Medicine; the adequacy of our existing supply of HuCNS-SC cells to complete our ongoing and planned clinical trials;

and the timing and prospects associated with filing an IND to initiate a clinical trial in age-related macular degeneration. 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 spinal cord injury, PMD or any other condition; uncertainties about whether myelination formed by donor cells, if any, will have

any biologic effect; uncertainties about whether preliminary data in any Phase I clinical study will prove to be reproducible or biologically meaningful in any future clinical study; risks whether the FDA or other applicable regulatory agencies

will permit the Company to continue clinical testing in spinal cord injury, PMD or in future clinical trials of proposed therapies for other

diseases or conditions such as age-related macular degeneration; 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 spinal cord injury, PMD, age-related macular degeneration, or in proposed therapies for other diseases or conditions; uncertainties regarding the potential for the

Company to grow its SC Proven business and to advance the development and commercialization of stem cell-based assays for drug discovery and development; 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; uncertainties about the Company s ability to secure funding from any governmental agency, such as the California Institute of Regenerative Medicine; 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; uncertainties regarding the validity and enforceability of the

Company s patents; uncertainties as to whether the Company will become profitable; and other factors that are described under the heading Risk Factors disclosed in Part I, Item 1A in the Company s Annual Report on Form

10-K for the year ended December 31, 2010 and in its subsequent reports on Form 10-Q and Form 8-K.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except share and

Unaudited Condensed Consolidated Balance Sheets