Regenerative Medicine Neurology

 News Release - September 10, 2009

StemCells, Inc. to Initiate First Ever Neural Stem Cell Trial in Myelination Disorder

Collaborates With UCSF Children’s Hospital for Conduct of Study

PALO ALTO, Calif.--(HSMN NewsFeed)--StemCells, Inc. (NASDAQ:STEM ) announced today that it will soon initiate with the University of California, San Francisco (UCSF) Children’s Hospital a Phase I clinical trial to evaluate the therapeutic potential of StemCells’ proprietary HuCNS-SC(R) product candidate (purified human neural stem cells) to treat Pelizaeus-Merzbacher Disease (PMD), a myelination disorder that primarily affects infants and young children. Myelin is the substance which surrounds and insulates nerve fibers (axons), and enables nerve cells to communicate with one another. Patients suffering from PMD have insufficient myelination of nerve cells in the brain, which leads to loss of neurological function and eventually death in the most severe forms of the disease. In this trial, patients with a fatal form of PMD will be transplanted with the Company’s HuCNS-SC cells to evaluate safety and to explore the ability of the cells to myelinate the patients’ nerve axons.

This trial will be the first ever clinical trial of neural stem cells in a myelination disorder, and will be the Company’s second clinical trial of its HuCNS-SC cells. The Company’s first clinical trial, a Phase I trial in neuronal ceroid lipofuscinosis (NCL, also often referred to as Batten disease) which was completed in January 2009, demonstrated a favorable safety profile along with evidence of engraftment and long-term survival of the HuCNS-SC cells.

“There is a compelling rationale for this trial, and it is a critical first step towards potentially helping seriously ill children who today have no treatment options, as this trial may provide proof-of-concept regarding the extent of myelination in these patients following transplantation of HuCNS-SC cells,” said Martin McGlynn, President and CEO of StemCells, Inc.

Stephen Huhn MD, FACS, FAAP, Vice President and Head of the CNS Program at StemCells, Inc., added, “Our clinical development strategy has been to use our HuCNS-SC cells to provide what the patient’s own cells cannot, whether that is a missing enzyme, as in NCL, or myelin, as in PMD. The goal is to have our cells protect the patients’ existing neurons and maintain their function. I believe that if we can show that these cells preserve neurological function in patients with PMD, then it is conceivable that patients suffering from other, more common, myelination disorders, such as multiple sclerosis, transverse myelitis and certain types of cerebral palsy, may also benefit from this approach.”

The trial will be conducted at UCSF Children’s Hospital, which is one of the top centers for pediatric neurology and neurosurgery in the United States. The principal investigator will be David H. Rowitch, M.D., Ph.D., a pediatric specialist and Chief of Neonatology at UCSF Children’s Hospital, and Professor of Pediatrics and Neurological Surgery, a Howard Hughes Medical Institute investigator, and a member of the Eli and Edythe Broad Center of Regeneration Medicine and Stem Cell Research, all at UCSF. Nalin Gupta, M.D., Ph.D., Chief of Pediatric Neurological Surgery at UCSF Children's Hospital, 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 will be co-investigators.

“Severe PMD is a devastating disease for which we have no treatment,” said Dr. Rowitch. “This trial will help us determine whether cell replacement therapy is safe for the young patients suffering from this condition, and may offer insights into whether the strategy offers prospects for treating the disease.”

Jeff Leonard, Trustee for the PMD Foundation, a patient advocacy and research support group, commented, "We have been waiting years for a clinical trial to emerge for PMD. The potential of a cell-based therapy to treat PMD represents hope for the patients and families impacted by this terrible disease. We are very excited that StemCells, Inc. has focused on PMD as an area of unmet medical need, and our foundation is committed to raising awareness for this groundbreaking trial."

About the PMD Clinical Trial

The Phase I trial is designed to assess the safety and preliminary efficacy of HuCNS-SC cells as a treatment for PMD. The trial is expected to enroll four patients with connatal PMD, which is the most severe form of the disease. 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. The Company is planning to follow the effects of this therapy long-term, so, as with the Phase I NCL trial, this trial will also be followed by a separate four-year observational study. Interested parties may find more information on patient enrollment at http://neonatology.ucsf.edu/research/ or by visiting www.stemcellsinc.com.

About Pelizaeus-Merzbacher Disease (PMD)

PMD is most commonly caused by a genetic mutation that affects an important protein found in myelin, proteolipid protein (PLP), and mostly occurs in males. Myelin, which is produced by specialized cells called oligodendrocytes, insulates nerve fibers (also known as axons) to allow electrical signals to be conducted normally. Patients with PMD have insufficient myelination of axons in the brain, leading to neurological impairment and eventually death in the fatal forms of the disease. PMD is most frequently diagnosed in early childhood and is associated with abnormal eye movements (nystagmus), abnormal muscle function, and in some cases seizures. Connatal PMD, the most severe form of the disease, is frequently diagnosed in early infancy with symptoms often present at birth.

About HuCNS-SC(R) 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; are able to engraft, migrate, and 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, act 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 diseases. The Company has demonstrated that, when transplanted into an animal model of hypomyelination (shiverer mouse), HuCNS-SC cells engraft and differentiate into mature 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.

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(R) 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 media products under the brand SC Proven(R), and is developing its cell-based technologies for use in drug discovery and 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 on its web site at www.stemcellsinc.com.

Apart from statements of historical fact, the text of this press release constitutes forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and is subject to the safe harbors created therein. These statements include, but are not limited to, statements regarding the potential for the Company’s therapies to treat PMD, NCL and other serious neurodegenerative diseases, the potential for its cell-based therapeutics to treat other diseases or disorders, and the future business operations of the Company, including its ability to conduct clinical trials as well as its other research and product development efforts. 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 the fact that additional trials will be required to demonstrate the safety and efficacy of the Company’s HuCNS-SC cells for the treatment of any disease; uncertainty as to whether the FDA or other applicable regulatory agencies will permit the Company to continue clinical testing in PMD, NCL or in future clinical trials of proposed therapies for other diseases or conditions given the novel and unproven nature of the Company’s technologies; 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 PMD, NCL or in other diseases or conditions; uncertainties regarding the ability of pre-clinical research, including research in animal models, to accurately predict success or failure in clinical trials, including in particular uncertainties regarding the ability of the Company's HuCNS-SC cells to engraft, survive and appropriately differentiate in humans, or to myelinate a patient’s nerve axons; uncertainties regarding the Company's ability to recruit the patients required to conduct this clinical trial or to obtain meaningful results based on the limited number of patients expected to be enrolled; uncertainties arising as a result of the serious condition of the patients expected to be enrolled; the fact that results obtained in any clinical trial in PMD may not be predicative of results that would be obtained in regard to other myelination disorders; 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 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 ability to commercialize a therapeutic product and its ability to successfully compete with other products on the market; uncertainties regarding the Company’s manufacturing capabilities given its increasing preclinical and clinical commitments; and the increased risks associated with commercializing future cell-based therapeutics, including the potential for product liability claims; and other factors that are described under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, and in its subsequent reports on Form 10-Q and Form 8-K.

Source: StemCells

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