StemCells, Inc. Announces Important Milestone in Batten Disease Clinical Trial

StemCells, Inc. (NASDAQ: STEM) today announced that the Phase I clinical trial of its proprietary HuCNS-SC™ product candidate (purified human neural stem cells) has successfully completed enrollment of the low-dose cohort and will proceed to the high-dose cohort. This trial is designed to evaluate the safety and preliminary efficacy of the HuCNS-SC product candidate as a treatment for infantile and late infantile neuronal ceroid lipofuscinosis (NCL), also often referred to as Batten disease. To date, three patients out of a planned total of six have been transplanted with HuCNS-SC cells. A review of the trial data to date, conducted by an independent Data Safety Monitoring Committee comprised of experts in pediatric neurosurgery, pediatric neurology, solid organ transplantation, and genetics, has identified no safety issues that would preclude advancing the trial to the next dose level. "This is a significant milestone for the trial and StemCells, Inc. We are halfway through the planned enrollment in the first FDA-approved clinical investigation of purified human neural stem cells. The first patient enrolled in the trial has now reached the halfway point of the study and completed a number of important assessments. To date, all three patients have tolerated the transplantation and have returned home,” said Stephen Huhn, M.D., F.A.C.S., F.A.A.P., Vice President and Head of the Neural Program of StemCells, Inc. "We are encouraged by the progress of the trial, but remain mindful of the difficult challenges involved with the development of novel therapeutics. We are also grateful for the participation of the families in this study and the commitment of the research staff at OHSU. Batten disease is a terrible affliction, and this trial is the first step on the path toward a treatment for this devastating disease and potentially other lysosomal storage disorders.” The clinical trial is being led by co-principal investigator Robert Steiner, Vice Chairman of Pediatric Research at Doernbecher Children's Hospital, and Professor of Pediatrics and Molecular & Medical Genetics in the OHSU School of Medicine; co-principal investigator Nathan Selden, Campagna Associate Professor of Pediatric Neurological Surgery and Head of the Division of Pediatric Neurological Surgery, Doernbecher and OHSU School of Medicine; co-investigator Thomas K. Koch, M.D., F.A.A.P., F.A.A.N., Director of Pediatric Neurology and Professor of Pediatrics and Neurology at Doernbecher, OHSU School of Medicine; and co-investigator Amira Al-Uzri, M.D., M.C.R., associate professor of pediatrics (pediatric nephrology and hypertension), and director of the pediatric kidney transplant program at Doernbecher Children's Hospital, OHSU School of Medicine. About Neuronal Ceroid Lipofuscinosis (Batten Disease) Neuronal ceroid lipofuscinosis is a fatal neurodegenerative disorder brought on by inherited genetic mutations. The disorder afflicts infants and young children, and the three most common forms of NCL—infantile, late infantile and juvenile onset—are often referred to as Batten disease. All forms have the same basic cause—lack of a lysosomal enzyme—and have similar progression and outcome. Children with NCL suffer seizures, progressive loss of motor skills, sight and mental capacity, eventually becoming blind, bedridden and unable to communicate. Infantile or late infantile NCL is brought on by inherited mutations in the CLN1 gene, which codes for palmitoyl-protein thioesterase 1 (PPT1) or in the CLN2 gene, which codes for tripeptidyl peptidase I (TPP-I), respectively. The consequence of these gene mutations is either a defective or missing enzyme that leads to accumulation of lipofuscin-like fluorescent inclusions in various cell types. These non-degraded lysosomal inclusions accumulate to the point of interference with normal cellular function and ultimately lead to the pathological manifestations of the disease. One way to treat the disease is to provide the brain with a replacement source of functional enzyme that can be taken up by the enzyme-deficient cells. About HuCNS-SC™ Cell-Based Therapeutic StemCells’ HuCNS-SC cell-based therapeutic product candidate is purified human neural stem cells prepared under controlled conditions. When HuCNS-SC cells are transplanted into the brain of a mouse model developed to mimic the human form of infantile NCL, the cells spread throughout the brain and produce the missing lysosomal enzyme. The enzyme level increases and continues to do so over time after the transplant. Thus, placement of HuCNS-SC cells in appropriate places in the brain provides the prospect of long-term delivery of the missing lysosomal enzyme. In laboratory studies, HuCNS-SC cells also produce the lysosomal enzyme missing in late infantile NCL, the other subtype being studied in the clinical trial. The production of both enzymes by HuCNS-SC cells provides a scientific rationale for enzyme replacement and cellular rescue in these two subtypes of NCL. About StemCells, Inc. StemCells, Inc. is a clinical-stage biotechnology company focused on the discovery, development and commercialization of cell-based therapeutics to treat diseases of the nervous system, liver and pancreas. The Company’s programs seek to repair or repopulate neural, liver or other tissue that has been damaged or lost as a result of disease or injury. StemCells has pioneered the discovery and development of HuCNS-SC cells, its highly purified population of human neural stem cells. The cells are expandable into cell banks for therapeutic use, which offers the potential of using normal, non-genetically modified cells as cell-based therapeutics. StemCells owns or has exclusive rights to more than 50 issued or allowed U.S. patents and more than 150 granted or allowed non-U.S. patents. Further information about the Company is available on its Web site at www.stemcellsinc.com. About OHSU and Doernbecher Children’s Hospital Oregon Health & Science University is the state’s only health and research university, and Oregon’s only academic health center. OHSU is Portland’s largest employer and the fourth largest in Oregon (excluding government), with more than 12,000 employees. OHSU’s size contributes to its ability to provide many services and community support activities not found anywhere else in the state. It serves 189,000 patients annually, and is a conduit for learning for more than 3,400 students and trainees. OHSU is the source of more than 200 community outreach programs that bring health and education services to every county in the state. As a leader in research, OHSU earned $294 million in research funding in fiscal year 2006. OHSU serves as a catalyst for the region’s bioscience industry and is an incubator of discovery, averaging one new breakthrough or innovation every three days, with more than 3,500 research projects currently under way. OHSU disclosed 116 inventions in 2006 alone, and OHSU research resulted in 28 new spinoff companies since 2000, most of which are based in Oregon. Doernbecher Children’s Hospital, a division of Oregon Health & Science University, is a world-class academic health center that each year cares for more than 56,000 patients from across the United States. In the most patient- and family-centered environment, children receive outstanding cancer treatment, specialized neurology care, highly sophisticated heart surgery, and care in many other pediatric specialties. In addition to several locations in the Portland metropolitan area, Doernbecher’s pediatric experts travel throughout Oregon and southwest Washington providing pediatric specialty care at 13 outreach clinics. Apart from statements of historical facts, 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. The 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 the forward-looking statements due to risks and uncertainties to which the Company is subject, including uncertainty as to whether results obtained in the animal models of infantile NCL, spinal cord injury, or other diseases and conditions will be able to be translated into treatment for humans; uncertainty as to whether the FDA or other applicable regulators or review boards 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 technology; uncertainties regarding the timing and duration of, and enrollment of patients in, any clinical trials; 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 stem cell programs will prove safe and clinically effective and not cause tumors or other side effects; uncertainty 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 the Company’s Annual Report on Form 10-K.