Rodney Young Chief Financial Officer (510) 456-4128 STEMCELLS, INC. REPORTS SECOND QUARTER FINANCIAL RESULTS NEWARK Calif.

STEMCELLS, INC. REPORTS SECOND QUARTER FINANCIAL RESULTS

NEWARK Calif., July 28, 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 reported financial results for the second quarter ended June 30, 2011.

The Company s management and Board of Directors remain keenly focused on the successful execution of three key business

objectives, namely the timely generation of clinical data from our groundbreaking clinical trials for HuCNS-SC in the brain, spinal cord and the eye, significantly reducing our operating cash burn, and the monetization of non-core, corporate real

estate and intellectual property assets, said Martin McGlynn, President and CEO of StemCells, Inc. Even with the continued uncertainties in the capital markets, the difficult financing environment for small-cap biotechs and the downward

price pressure we ve been experiencing recently on our stock, we firmly believe our approach of working towards meaningful clinical data in a thoughtful cash-conscious way is the best pathway forward for the growth of stockholder value. Already

this year, we ve taken a number of steps to materially reduce our operating costs while at the same time advancing our clinical development program. Given this, it is difficult to explain the striking disconnect between our current market value

and what we believe is the significant potential value inherent in the Company s technologies.

currently conducting a Phase I/II clinical trial in chronic spinal cord injury in Switzerland, and expects to enroll and dose the first cohort of that trial this year. The Company has completed patient enrollment in a Phase I trial in

Pelizaeus-Merzbacher disease (PMD), a fatal myelination disorder in children, and plans to initiate a Phase I/II clinical trial early next year in Age-Related Macular Degeneration, the leading cause of vision loss and blindness in people over the

Second Quarter and Recent Business Highlights

Therapeutic Product Development

Tools and Technologies Programs

Second Quarter Financial Results

For the second quarter of 2011, the Company reported a net loss of $4,035,000, or $(0.29) per share, compared with a net loss of $4,610,000, or $(0.38) per share, for the second quarter of 2010. Loss from

operations in the second quarter of 2011 was $7,090,000, which was relatively flat when compared to the $7,051,000 loss from operations in the second quarter of 2010.

Total revenue during the second quarter of 2011 was $234,000, compared to $244,000 in the same period of 2010. Revenue from product sales in the second quarter of 2011 was $185,000, which was a 153%

increase compared to the same period of 2010. This growth was driven by both increased unit volumes and new products in the Company s SC Proven media and reagents business. Revenue from licensing agreements and grants was $49,000, which was a

71% decrease compared to the previous year primarily due to the completion and termination of several projects funded by grants.

Total operating expenses in the second quarter of 2011 were $7,272,000, compared to

$7,271,000 in the same period of 2010. Operating expenses in the second quarter of 2011 include $260,000 for severance and other expenses related to the reduction-in-force effected by the Company in May. In the second quarter of 2011, selling,

general and administrative expenses of $2,103,000 were 8% lower compared to the same period of 2010, while research and development expenses of $5,054,000 were 4% higher in the second quarter of 2011 compared to the same quarter of 2010 as the

Company continued to prioritize its product development efforts.

Other income in the second quarter of 2011 was $3,055,000,

compared to $2,441,000 in the second quarter of 2010. This increase was primarily due to a decrease in the estimated fair value of warrant liability.

Cash, cash equivalents and marketable securities at June 30, 2011 totaled $15,657,000, compared with $19,899,000 at December 31, 2010. For the six-month period ended June 30, 2011, net cash

used in operating activities was $13,131,000, which was 4% lower than the same period in 2010.

StemCells, Inc. will host a live conference call and webcast today, July 28, 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 initiate a Phase

I/II clinical trial of HuCNS-SC cells in age-related macular degeneration early next year, 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 ability to realize

cost savings from the announced reduction in force; the ability to realize the benefit of the Company s earlier investments in process development and manufacturing; 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; 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;

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