STEMCELLS, INC. REPORTS FOURTH QUARTER AND YEAR END 2011 FINANCIAL RESULTS AND PROVIDES BUSINESS UPDATE NEWARK, CA (

STEMCELLS, INC. REPORTS FOURTH QUARTER AND YEAR END 2011 FINANCIAL RESULTS AND

PROVIDES BUSINESS UPDATE

NEWARK, CA (March 13, 2012) 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 fourth quarter and year ended December 31, 2011 and provided a business update.

The StemCells team made significant progress in 2011 with regard to two critical goals for the Company, namely accelerating and broadening our

HuCNS-SC neural stem cell clinical trial agenda for diseases of, and injuries to, the central nervous system, while at the same time reducing our operating cash burn. We are now uniquely positioned as the only stem cell company pursuing clinical

trials for disorders of all three organs of the CNS, the brain, spinal cord and eye, said Martin McGlynn, President and CEO of StemCells, Inc. We have strong preclinical data underlying all our clinical trials, much of which has already

been published in peer-reviewed journals, but we realize that the true test of our proprietary cell-based technology will be in the clinic. In this regard, I am pleased to confirm StemCells remains on track to report safety and efficacy data from

our recently completed Phase I Pelizeaus-Merzbacher disease trial at the European Leukodystrophy Association meeting to be held in Paris, March 31-April 1. We are confident that executing our clinical trial agenda, while controlling our

cash burn, is the best way to build lasting shareholder value.

Fourth Quarter and Recent Business Highlights

Therapeutic Product Development

Tools and Technologies Programs

Other Business Activities

Fourth Quarter 2011 Financial Results

For the fourth quarter of 2011, the Company reported a net loss of $7,212,000, or $(0.47) per share, compared with a net loss of $8,957,000, or $(0.70)

per share, for the fourth quarter of 2010. Loss from operations in the fourth quarter of 2011 was $7,313,000, which was 5% lower when compared to the $7,706,000 loss from operations in the fourth quarter of 2010. Included in net loss and loss from

operations in the fourth quarter of 2011 is a charge of $655,000 for the write-off of an acquired intangible asset.

Total revenue during the fourth quarter of 2011 was $541,000, compared to $699,000 in the same period of

2010. The decrease of 23% from 2010 to 2011 was due to both lower product sales and lower licensing and grant revenues. Total revenues in the fourth quarter of 2010 were higher due to a particularly strong quarter in our SC Proven business as well

as the receipt of a milestone payment under a licensing agreement of approximately $438,000 in 2010.

Total operating expenses in the fourth

quarter of 2011 were $7,807,000, compared to $8,341,000 in the fourth quarter of 2010. Excluding the impairment of the intangible asset, which is included as an operating expense, total operating expenses in the fourth quarter of 2011 were

$7,152,000, or 14% lower than the same period in 2010. In the fourth quarter of 2011, research and development expenses totaled $4,834,000, or 18% less than in the same period of 2010, while selling, general and administrative expenses totaled

$2,290,000, or 8% lower. The significant reduction in operating expenses was primarily attributable to the Company s cost containment efforts, including the reduction in force effected in May 2011.

Other income, net in the fourth quarter of 2011 was $102,000, compared to other expense, net of $1,449,000 in the fourth quarter of 2010. The change from

2010 to 2011 was primarily due to changes in the estimated fair value of warrant liability, as well as the receipt in 2010 of $978,000 in grants under the federal government's Qualifying Therapeutic Discovery Project (QTDP) program.

Full Year 2011 Financial Results

the full year 2011, the Company reported a net loss of $21,329,000, or $(1.50) per share, compared with a net loss of $25,244,000, or $(2.05) per share, for 2010. Loss from operations was $28,076,000, which was 4% lower when compared to $29,360,000

for 2010. Included in net loss and loss from operations in 2011 is a charge of $655,000 for the write-off of an acquired intangible asset.

Total revenue in 2011 was $1,221,000, compared to total revenue of $1,427,000 reported in 2010. In 2011, however, product sales revenue from the

Company's SC Proven line of media and reagents increased 33% over 2010, driven both by higher unit volumes as well as the introduction of new products. Licensing and grant revenue was lower in 2011 primarily due to the receipt of a milestone payment

under a licensing agreement of approximately $438,000 in 2010.

Total operating expenses in 2011 were $29,082,000, compared to $30,618,000 in

2010. Excluding the $655,000 write-off of the intangible asset, total operating expenses declined 7% compared to 2010. Research and development expenses in 2011 were $19,938,000, a 5% decrease compared to $21,019,000 in 2010. Selling, general and

administrative expenses in 2011 were $8,202,000, a 13% decrease compared to $9,377,000 in 2010. The reduction in operating expenses was primarily attributable to the Company s cost containment efforts, including the reduction in force effected

Other income in 2011 was $6,748,000, compared with $4,116,000 in 2010. Other income in both periods was primarily driven by a

decrease in the estimated fair value of warrant liability, which totaled $6,612,000 in 2011 and $3,005,000 in 2010. Other income in 2010 also included $978,000 in grants received under the QTDP program.

For the full year 2011, cash used in operations totaled $22,058,000, compared to $24,520,000 in 2010.

However, in the last six months of 2011, which includes the effect of the reduction in force effected in the second quarter, cash used in operations was slightly less than $9 million.

At December 31, 2011, the Company's cash, cash equivalents and marketable debt securities totaled $16,592,000. In the first quarter of 2012, the Company has also received aggregate gross proceeds of

approximately $1.4 million from the exercise of warrants and receipt of a licensing fee. Including these proceeds, the Company s pro forma cash balance at December 31, 2011, would be approximately $18 million.

StemCells will host a

live conference call and webcast today, March 13, 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. The Company recently completed a Phase I clinical trial in Pelizaeus-Merzbacher disease (PMD), a

fatal myelination disorder in children, and the trial data will be reported in late March. The Company is also conducting a Phase I/II clinical trial in chronic spinal cord injury in Switzerland and has received authorization from the FDA to

initiate a Phase I/II clinical trial in dry age-related macular degeneration (AMD). In addition, the Company is pursuing preclinical studies of its HuCNS-SC cells in Alzheimer's disease. StemCells also markets stem cell research products,

including media and reagents, under the SC Proven brand. 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 initiating 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.

Chief Financial Officer

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except share and

Unaudited Condensed Consolidated Balance Sheets