1. No category

 Unlocking the Value of Science ™ 
StemCells Inc. (STEM)
UPDATE REPORT
November 17, 2014
Rating
Target
Neutral
$2.00
Analyst
Stephen M. Dunn
Sr. Managing Director Research
[email protected]
(954) 240-9968
Symbol: STEM
Market: Nasdaq
7707 Gateway Blvd.
Newark, CA 94560
(510) 456-4000
www.StemCellsInc.com
CEO – Martin McGlynn
CFO – Greg Schiffman
 Maintaining Neutral - Long Phase II Data Horizon
 Live Investor & KOL Webcast Thursday
 Phase II Trial Started for Cervical Spinal Cord Injury
 Phase II Trial Starting Soon for Dry AMD
NOTE: StemCells, Inc. will host a live investor and analyst webcast on
Thursday, November 20, at 12:00pm EST (9:00am PST). The live webcast is
at: http://www.media-server.com/m/p/m8h3mw5w
Initiated Controlled Phase II Trial for Cervical Spinal Cord Injury:
StemCells Inc. initiated a controlled Phase II trial (“the Pathway Study”) of
their HuCNS-SC in cervical spinal cord injury patients. The trial will enroll
patients with cervical spinal cord injuries in the C5 to C7 region (representing
the majority of cervical spinal cord injuries). The patients will be randomized
to either a HuCNS-SC treatment arm or a non-treatment arm with blinded
outcome assessment in approximately 12 centers in North America. It is
expected to complete enrollment within one year with endpoints measured at
one year post-transplantation. (see Human Trials of HuCNS-SC® for Chronic
Spinal Cord Injury)
Initiating Controlled Phase II in Dry AMD in Q4/Q1: StemCells Inc.
stated they expect to initiate a controlled Phase II efficacy proof-of-concept
study by year-end 2014 (or possibly Q1) and complete enrollment in
approximately one year. Trial design details have not yet been disclosed.
Investors should note that 85% of all AMD patients currently have the Dry
form and 100% of patients with the more serious Wet form progressed from
the initial Dry form. The dry form can also cause vision loss without turning
into the wet form. (see Human Clinical Trial of HuCNS-SC for Dry AMD)
Patent Infringement Suit Against Neuralstem Scheduled for December:
StemCells Inc. ongoing patent infringement lawsuit against Neuralstem
(NYSE MKT:CUR) has now completed (continued on next page…)
Market Data
Share Data
Most Recent Quarter
Price
$1.23
Outstanding
68.7M
Revenue
$0.3M
52-Week
$1.02-$2.43 Cash/Share
$0.47
Net Income
($2.8M)
Market Cap
84.5M
Book/Share
$0.23
EPS
($0.04)
Avg. Daily Vol.
914,812
Price/Book
5.3x
Cash
$32.2M
% Short
5.6%
Debt/Share
$0.23
Debt
$16.0M
Financial Results and Projections
FYE Dec. 31
2012
2013
2014E
2015E
2016E
Revenue
$1.4M
$1.2M
$1.1M
$0.5M
$0.5M
($28.5M)
($26.4M)
($31.9M)
Net Income
($35.3M)
($39.4M)
EPS
($0.99)
($0.61)
($0.52)
($0.42)
($0.43)
Please see last two pages for important disclosures and analyst certification
StemCells Inc. (STEM)
Page 1 of 35
www.LifeTechCapital.com
November 17, 2014
Patent Infringement Suit Against Neuralstem Scheduled for December: StemCells Inc. ongoing patent infringement
lawsuit against Neuralstem (NYSE MKT:CUR) has now completed the discovery phase and the first phase of the bench
trial is expected to commence in December 2014. Investors should note that there are no claims of patent infringement
against StemCells, Inc. by Neuralstem. (see Intellectual Property)
Licenses and Exits SC Proven Business: On November 10, 2014, StemCells Inc. granted certain licenses and sold
certain assets to Takara Bio Inc. so that it could sell the “SC Proven” research tools on a worldwide and exclusive basis
beginning January 1, 2015. StemCells Inc. will receive $800,000 and anticipates winding down the Stem Cell Sciences
businesses after disposing of remaining inventory and complete tech transfer to Takara Bio.
Maintaining Neutral: While we remain enthusiastic about StemCells Inc.’s science and clinical prospects, we note the
stock price will now be facing headwinds during our next 12-18 month forecast period. Based on our estimated events and
milestone timelines, we do not foresee significant upward news catalysts during our forecast period. We also believe that
the company will be required to raise additional funds before results from their controlled Phase II trials become available.
We further note the company has had difficulty maintaining the stock price over $2.00 during the past 3 years as capital
requirements have created constant pressure on the stock due to dilution. Finally, we believe investor sentiment for the
company’s shares has turned cautious due to these factors and we expect it to remain so until the controlled Phase II data
is announced. Our Neutral rating and 12-18 month target price of $2.00 is based on 35x estimated 2020 EPS discounted
50% for cumulative risks.
Company Description
Newark, California-based StemCells Inc. is engaged in the discovery and development
of non-embryonic stem cell-based therapeutics to treat damage or degeneration of
major organ systems. Development has primarily been directed at identifying,
isolating, culturing, and purifying human neural stem cells (HuCNS-SC®) and developing them as potential cell-based
therapeutics for the central nervous system (CNS). StemCells Inc. is currently in human clinical development for several
indications such as Chronic Spinal Cord Injury and Dry Age-Related Macular Degeneration (AMD). StemCells Inc. is
also collaborating on Alzheimer’s disease and is currently conducting pre-clinical work with UC Irvine. Commercially,
StemCells Inc. develops and markets over two dozen products to the stem cell research community through their SC
Proven® brand of tools & technologies. Finally, the company has completed early-stage trials in Pelizaeus-Merzbacher
Disease (PMD), a myelination disorder in the brain and is currently seeking a development partner for that indication.
Q4 2009
Q4 2010
Q1 2011
Estimated Development Timeline (Subject to Significant Changes)
Human Central Nervous System Stem Cells (HuCNS-SC)
PelizaeusSpinal Cord
Retinal
Merzbacher
(Thoracic & Cervical)
(Dry AMD)
(Myelin)
 Initiate Phase I
 File IND (Swiss)
 Initiate Phase I/II
 Complete
(Thoracic)
Enrollment
Q2 2011
 Phase I 6 Month
Results
Q3 2011
Q4 2011
Alzheimer’s
Collaboration
Signed
Dr. LaFerla
/ UC Irvine
Awarded CIRM
Planning Grant
 Complete Enrollment
for Cohort I AIS-A
(Thoracic)
StemCells Inc. (STEM)
Page 2 of 35
www.LifeTechCapital.com
 IND Approval
Q1 2012
Q2 2012
Q3 2012
 Interim Cohort I AIS-A
Results (Thoracic)
 Initiate Enrollment
for Cohort II AISA & -B
patients (Thoracic)
 Presentation at ISCS
Conf.
Q1 2013
 Phase I 12Month
Results
 $20M CIRM
Disease Award
 Publication
 Final Cohort I AIS-A
Results (Thoracic)
 Phase I 24Month
Results
Q3 2013
 Complete Enrollment
for Cohort II AIS-A & B
patients (Thoracic)
 Initiate Enrollment for
Cohort III AIS-A, B & C
patients (Thoracic)
 FDA Phase II
Design Discussions
 Complete
Enrollment for
Cohort I (200K cells)
Q1 2014
 Complete Enrollment for
Cohort III AIS-A, B & C
patients (Thoracic)
Q2 2014
Discussions
with CIRM
 Accept $19.3M
CIRM Disease
Award
Q2 2013
Q4 2013
Apply for CIRM
Disease Award
 Initiate Phase I/II
 Initiate Enrollment
Q4 2012
November 17, 2014
 Interim Results for Cohort
II at ASIA May 17
 Interim Results for Cohort
II at NNS June 29-July 2
 Interim Cohort I
Results at ISSCR
 Complete
Enrollment for
Cohort II (1M cells)
 Begin Seeking
Development
Partner
 IND-Enabling
Pre-Clinical
Development
Q3 2014
Q4 2014
Initiate Phase II (Cervical)
Final Results for Cohort II
(Thoracic)
Final Results Cohort
I (200K cells)
Initiate Phase II
Q1 2015
Q2 2015
Q3 2015
Q4 2015
H1 2016
Final Results for Cohort III
(Thoracic)
Interim Results Phase II
Cohort I Dosing (Cervical)
Complete Phase II
Enrollment (Cervical)
Interim Results Phase II
Cohort II Randomized
StemCells Inc. (STEM)
Final Results Cohort
II (1M cells)
Interim Results Phase
II
Complete Phase II
Enrollment
File IND for
Alzheimer’s
Page 3 of 35
www.LifeTechCapital.com
H2 2016
(Cervical)
Results Phase II (Cervical)
November 17, 2014
Disease
Results Phase II
Source: StemCells Inc. and LifeTech Capital estimates
Stem Cells
What are Stem Cells?
Stem cells are unique in that they can divide and replicate for long periods and can be induced to differentiate into specific
cell types such as neuronal, liver, retinal, bone, pancreatic and others. This allows living organism to maintain and repair
damaged tissue.
There are two types of stems cells, embryonic and non-embryonic or adult stem cells. Embryonic stem cells are derived
from embryos that develop from eggs fertilized in vitro. While these stem cells are the most versatile and can theoretically
differentiate into any type of cell the body requires (pluripotent), the process has resulted in moral and political objections.
There are also some concerns about safety issues, such as potential tumor genesis.
Non-embryonic and adult stem cells have limited differentiation abilities compared to embryonic stem cells. They can
differentiate into cell subtypes belonging to the same organ or tissue from which they were derived and their replication
abilities make them extremely useful for regenerating and repairing damage in their specific organ or tissue of origin.
What Type of Stem Cells Does StemCells Inc. Use?
StemCells Inc. uses non-embryonic stem cells which are
derived from specific tissue such as the brain and liver. The
brain or liver cells are marked with specific monoclonal
antibodies (MAb) and the stem cells are extracted and
purified (for instance, only 2.3% of the cells in the brain are
neuronal stem cells). The cells are then cultured and
expanded to increase their number until the desired volume is
reached.
StemCells Inc. Manufacturing Process - Overview
Specifically, StemCells Inc. is focused on Human Central
Nervous System Stem Cells (HuCNS-SC) and Human Liver
Engrafting Cells (hLEC).
Preclinical Work
Source: StemCells Inc.
StemCells Inc. has performed enough preclinical work on
HuCNS-SC for the FDA to allow their use in human clinical trials. Some of the preclinical work included the
characterization, migration, engraftment and differentiation of the cells. StemCells Inc. also performed animal testing for
efficacy, safety and toxicity (including tumor genesis). Commercialization testing was performed for stability, sterility and
consistency. Preclinical work is continuing on hLEC.
HuCNS-SC® (Human Central Nervous System Stem Cells)
HuCNS-SC are created by finding and separating the NeuroSphere-Initiating Cells (NS-IC) (using CD133+/CD24-/lo
expression) which can then differentiate into Neuroblast (neurons) and Gliablast (astrocytes & oligodendrocytes) cells.
HuCNS-SC grown as NS-ICs have shown a normal karyotype (chromosomal characteristics), do not form tumors in-vivo
and retain multipotent progenitor capabilities.
StemCells Inc. (STEM)
Page 4 of 35
www.LifeTechCapital.com
November 17, 2014
How Do HuCNS-SC Differentiate Into the Proper Cell Type?
When HuCNS-SC are implanted, they take biochemical cues from the mature cells surrounding it. For example, HuCNSSC implanted into the olfactory bulb will differentiate into neurons while HuCNS-SC implanted into a blood vessel will
differentiate into astrocytes. StemCells Inc. has done extensive work on the proliferation, migration & differentiation
characteristics of HuCNS-SC in preclinical testing.
StemCells Inc. HuCNS-CS®
Source: StemCells Inc.
Chronic Spinal Cord Injury Background & Development Program
Human Trials of HuCNS-SC® for Chronic Spinal Cord Injury (SPI)
UPDATE:
Controlled Phase II with Cervical SPI Begins: On October 7, 2014 StemCells Inc.initiated a Phase II trial (the Pathway
Study) for cervical spinal cord injury patients, which represents approximately 60% of all traumatic spinal cord injuries.
CLINICAL TRIAL DESIGN
Trial Design: The “Pathway Study” trial will enroll up to 50 patients with cervical spinal cord injuries in the C5 to C7
region (this region represents the majority of cervical spinal cord injuries). The patients will be randomized to either a
HuCNS-SC treatment arm or a non-treatment arm with blinded outcome assessment in approximately 12 centers in North
America. It is expected to complete enrollment within one year with the endpoints measured one year posttransplantation. Final data in all patients is currently expected in May 2017 however interim data analysis may be possible
during the trial. Details of the trial design can be found at: http://www.clinicaltrials.gov/ct2/show/NCT02163876
Level of
injury
C2 - C3
C4
Possible impairment
Rehabilitation potential
Usually fatal as a result of inability to breathe
Quadriplegia and breathing difficulty
Totally dependent for all care
Dependent for all cares; usually needs a ventilator
May be able to feed self-using assistive devices; usually can
breathe without a ventilator, but may need other types of
respiratory support
May be able to propel a wheelchair inside on smooth surfaces;
may be able to help feed, groom, and dress self; dependent on
C-5
Quadriplegia with some shoulder and elbow
function
C6
Quadriplegia with shoulder, elbow, and some
wrist function
StemCells Inc. (STEM)
Page 5 of 35
www.LifeTechCapital.com
C7
Quadriplegia with shoulder, elbow, wrist, and
some hand function
C8
Quadriplegia with normal arm function; hand
weakness
November 17, 2014
others for transfers
May be able to propel a wheelchair outside, transfer self, and
drive a car with special adaptions; may be able to help with
bowel and bladder programs
May be able to propel a wheelchair outside, transfer self, and
drive a car with special adaptions; may be able to help with
bowel and bladder programs
Source: Johns Hopkins Medicine
Title
# of Patients
Trial Design
Ages
Treatment
Arm
Control Arm
Endpoints
Inclusion
Exclusion
Centers
Investigators
PHASE II HUMAN CLINICAL TRIAL PROTOCOL (PATHWAY STUDY)
A Single-Blind, Randomized, Parallel Arm, Phase II Proof-of-Concept Study of the Safety and Efficacy
of Human Central Nervous System Stem Cells (HuCNS-SC) Transplantation in Cervical Spinal Cord
Injury
50 Male and Female
Interventional, Randomized, Safety/Efficacy Study, Parallel, Single Blind
18 to 60 Years
Intramedullary transplantation of HuCNS-SC cells in the cervical spine
No Intervention: Non-Surgery
Primary: Change from baseline in ISNCSCI upper extremity motor scores one year after transplant
Secondary: Serious and non-serious adverse events one year after transplant. Laboratory tests,
neurological examination, ISNCSCI motor and sensory scores, pain and allodynia assessment, AIS
grade, physical examination and modified Ashworth scale
 Traumatic cervical spinal cord injury (cSCI) with C5-C7 motor levels according to the International
Standards for Neurological Classification of Spinal Cord Injury (ISNCSCI) as determined by the
Investigator.
 American Spinal Injury Association Impairment Scale (AIS) Grades A, B or C
 Minimum of 12 weeks post-injury prior to Screening
 History of penetrating SCI
 MRI evidence of complete spinal cord interruption
 Evidence of spinal instability, stenosis and/or persistent cord compression related to the initial trauma
 Prior participation in another investigational study within 90 days prior to Screening
 Previous organ, tissue, bone marrow transplantation, or gene transfer
 History of malignancy (except non-melanoma skin cancers) that require(d) radiation and/or
chemotherapy
University of Miami Miller School of Medicine
Allan D. Levi - University of Miami Miller School of Medicine
Stephen Huhn, MD StemCells, Inc. – Study Director
Source: ClinicalTrials.gov NCT02163876
COMPLETED -Phase I/II Trial in Thoracic Spinal Cord Injury
On April 17, 2014, StemCells Inc. stated that all 12 required patients have been transplanted in the Thoracic spinal cord
injury trial. This is the first clinical trial evaluating stem cell transplantation in spinal cord injury to successfully complete
enrollment. The company expects final results from this trial to be released mid-2015.
4 Out Of 8 Patients Show Improvement: On May 17, 2014, Dr Armin Curt presented updated interim results on 5
additional patients including the less-severe AIS-B patients. Of particular note is that the significant gains in sensory
function previously seen in 2 out of 3 patients in the 1st cohort were also seen in 2 additional patients in the 2nd
cohort. The presentation was at the American Spinal Injury Association meeting in San Antonio, Texas. Investors should
note that 4 out of 8 patients with 6 to 12 month follow up have experienced segmental sensory improvement, which
would normally be unexpected in these patients making these results very significant. Details at:
http://www.stemcellsinc.com/Presentations/ASIA_FINAL.pdf
StemCells Inc. (STEM)
Page 6 of 35
www.LifeTechCapital.com
AIS-A Patient Sensory Gains
November 17, 2014
AIS-B Patient Sensory Gains
Source: StemCells Inc. & LifeTech Capital
These results in thoracic spinal cord injury support the planned StemCells Inc. controlled clinical trial in patients with
cervical spinal cord injury.
COHORT I AIS-A RESULTS (FIRST 3 PATIENTS):
On February 12, 2013, StemCells Inc. announced the final 12-month data from the 1st patient cohort in the Phase I/II
clinical trial of their HuCNS-SC® (purified human neural stem cells) for thoracic chronic spinal cord injury. The results
showed that the gains in sensory function observed in 2 of the 3 patients at 6 months persisted for the 12 month period. Of
particular note is that 1 patient improved from being classified as a complete injury (AIS-A) to being reclassified
as an incomplete injury (AIS-B). The third patient remains stable and the HuCNS-SC® continued to demonstrate a
favorable safety profile.
Best Patient Progress Through 12 Months
(Red=No Sensation Green=Functional Yellow=Gains in Sensory Function)
Source: StemCells Inc.
On September 4, 2012, StemCells Inc. announced interim 6-month data from the 1st patient cohort in the Phase I/II clinical
trial of their HuCNS-SC® (purified human neural stem cells) for thoracic chronic spinal cord injury. 2 out of the 3
patients showed considerable gains in sensory function and the third patient remains stable. The trial represents the
first time that neural stem cells have been transplanted as a potential therapeutic agent for spinal cord injury. The data was
presented by Armin Curt, M.D., Professor and Chairman of the Spinal Cord Injury Center at Balgrist University Hospital,
StemCells Inc. (STEM)
Page 7 of 35
www.LifeTechCapital.com
November 17, 2014
University of Zurich and principal investigator for the clinical trial, at the 51st Annual Scientific Meeting of the
International Spinal Cord Society in London.
Dr. Curt stated “The gains in sensation have evolved in a progressive pattern below the level of injury and are
unanticipated in spinal cord injury patients with this severity of injury, suggesting that the neural stem cells are having
a beneficial clinical effect. Sensory function of all these patients was stable before transplantation, so the reappearance of
sensation is rather unexpected." It is believed that this is the first time a significant sensory improvement has been
reported in patients with complete spinal cord injury following stem cell transplantation.
 The first cohort consisted of 3 patients classified as AIS-A having complete injury to the thoracic (chest-level)
spinal cord. These patients have what is considered to be a "complete" injury, or no movement or feeling below
the level of the injury.
 All 3 patients were transplanted 4 to 9 months after injury with a dose of 20 million cells at the site of injury.
 Changes in sensitivity to touch, heat and electrical stimuli were observed in well-defined and consistent
areas below the level of injury in 2 of the patients, while no changes were observed in the third patient.
 Importantly, tests of perception of different sensory stimuli as well as measures of electrical impulse
transmission across the site of injury correlate with the clinical examination, providing independent and
objective confirmation of the changes in sensory function.
 The surgery, immunosuppression and the cell transplants have been well tolerated by all the patients.
 There were no abnormal clinical, electrophysiological or radiological responses to the cells, and all the patients
were neurologically stable through the first 6 months following transplantation.
AIS A Cohort - 6 Month Analysis Shows Unanticipated Results
Normal Distribution of Patient Improvement
2 of 3 HuCNS-SC® Implanted Patients
(T2-T9 injury 120 to 300 days post-injury)
Show Improvement Beyond Norm
Source: J Zariffa et al “Characterization of neurological recovery following
traumatic sensorimotor complete thoracic spinal cord injury” Spinal Cord
49, 463–471: 2011
Subject
Age / Sex
Injury
1
23 / Male
Motor Vehicle
StemCells Inc. (STEM)
Source: Curt A., Huhn S. et al “Phase I/II Clinical Trial of HuCNS-SC®
Cells in Chronic Spinal Cord Injury- Analysis and Summary of 6 Month
Interim Data” September 4, 2012
Injury
Date
4/23/11
Level
Transplant Date
T8
9/21/11
Page 8 of 35
www.LifeTechCapital.com
2
3
53 / Male
45 / Male
Poly-Trauma
Bicycle
2/19/11
8/13/11
November 17, 2014
T9
T4
11/9/11
12/14/11
CLINICAL TRIAL DESIGN
Trial Design: The trial will enroll 12 patients with thoracic (chest-level) spinal cord injury (neurological injury level of
T2-T11), and will include both complete and incomplete injuries as classified by the American Spinal Injury Association
(AIS) Impairment Scale. All patients will receive HuCNS-SC cells through direct transplantation into the spinal cord, and
will be temporarily immunosuppressed. Following transplantation, the patients will be evaluated regularly over a 12month period in order to monitor and evaluate the safety and tolerability of the HuCNS-SC cells, the surgery and the
immunosuppression, and to measure any recovery of neurological function below the injury site. StemCell Inc. will follow
the long-term effects in a separate four-year observational study at the conclusion of this trial.

The first cohort includes 3 patients classified as AIS-A. These patients have what is considered to be a "complete"
injury, or no movement or feeling below the level of the injury. The 12-month data was presented February 12,
2013 and the 24-month data was presented August 2, 2013.

The second cohort will progress to 4 patients classified as AIS- A or AIS-B (patients with some degree of feeling
below the injury

The third cohort will consist of 5 patients classified as AIS-A, AIS-B or AIS-C (patients with some degree of
movement below the injury).
Endpoints: In addition to assessing safety, the trial will evaluate preliminary efficacy using defined clinical endpoints,
such as changes in sensation, motor, and bowel/bladder function.
Additional background can be found at http://clinicaltrials.gov/ct2/show/NCT01321333
Title
# of Patients
Trial Design
Ages
Treatment
Endpoints
Inclusion
Exclusion
Centers
PHASE I/II HUMAN CLINICAL TRIAL PROTOCOL
A Phase I/II Study of the Safety and Preliminary Efficacy of Intramedullary Spinal Cord Transplantation
of Human Central Nervous System (CNS) Stem Cells (HuCNS-SC®) in Subjects With Thoracic (T2T11) Spinal Cord Trauma
12 (Male and Female)
Open Label, Non-Randomized, Safety/Efficacy Study, Single Group Assignment
18 to 60 Years
Single dose intramedullary transplantation of HuCNS-SC cells in the thoracic spinal cord
Study subjects will receive immunosuppression for nine months following transplantation
Primary: Types and frequencies of adverse and serious adverse events one year after transplant
Secondary: Patients will be enrolled in a separate 4 year long-term follow-up study
 T2-T11 thoracic spinal cord injury based on American Spinal Injury Association (AIS) level
determination by the principal investigator (PI)
 T2-T11 thoracic spinal cord injury as assessed by magnetic resonance imaging (MRI) and/or
computerized tomography (CT)
 AIS Impairment Scale (AIS) Grade A, B, or C
 Minimum of six weeks post injury for the initiation of screening
 Must have evidence of preserved conus function
 Must be at stable stage of medical recovery after injury
 History of traumatic brain injury without recovery
 Penetrating spinal cord injury
 Evidence of spinal instability or persistent spinal stenosis and/or compression related to initial trauma
 Previous organ, tissue or bone marrow transplantation
 Previous participation in any gene transfer or cell transplant trial
 Current or prior malignancy
University Hospital Balgrist- Uniklinik Balgrist, Forschstrasse 340 Zurich, Switzerland, 8008
StemCells Inc. (STEM)
Page 9 of 35
www.LifeTechCapital.com
November 17, 2014
Foothills Medical Center, Alberta, Canada
Toronto Western Hospital, Toronto, Canada
Armin Curt, MD University Hospital Balgrist
Investigators Steve Casha, MD Foothills Medical Center, Alberta, Canada
Michael Fehlings, MD Toronto Western Hospital, Toronto, Canada
Source: ClinicalTrials.gov NCT01321333
Pre-Clinical Results for HuCNS-SC® for Spinal Cord Injury
On August 18, 2010 StemCells Inc. announced publication of new preclinical data for their proprietary HuCNS-SC®
human neural stem cells in restoring lost motor function in mice with chronic spinal cord injury. This was the first
published study showing human neural stem cells can restore mobility when administered after acute phase of trauma,
suggesting the prospect of treating a much broader population of injured patients than previously demonstrated. With
approximately 1,250,000 patients suffering chronic spinal cord injury in the U.S., effective treatment in the chronic stages
would be a significant achievement.
The paper is titled "Human Neural Stem Cells Differentiate and Promote Locomotor Recovery in an Early Chronic Spinal
Cord Injury NOD-scid Mouse Mode"
Methods and Findings: hCNS-SCns were transplanted into immunodeficient NOD-scid mice 30 days post spinal cord
contusion injury. hCNS-SCns transplanted mice demonstrated significantly improved locomotor recovery compared to
vehicle controls using open field locomotor testing and CatWalk gait analysis. Transplanted hCNS-SCns exhibited longterm engraftment, migration, limited proliferation, and differentiation predominantly to oligodendrocytes and neurons.
Astrocytic differentiation was rare and mice did not exhibit mechanical allodynia. Furthermore, differentiated hCNS-SCns
integrated with the host as demonstrated by co-localization of human cytoplasm with discrete staining for the paranodal
marker contactin-associated protein.
Conclusion: The results suggest that hCNS-SCns are capable of surviving, differentiating, and promoting improved
locomotor recovery when transplanted into an early chronic injury microenvironment. These data suggest that hCNSSCns transplantation has efficacy in an early chronic SCI setting and thus expands the “window of opportunity” for
intervention.
The paper may be accessed at: http://dx.plos.org/10.1371/journal.pone.0012272
StemCells Inc. (STEM)
Page 10 of 35
www.LifeTechCapital.com
November 17, 2014
StemCells Inc. huCNS-SC Promote Improved Locomotor Recovery on Multiple Tests
(A) BMS locomotor performance is significantly improved in hCNS-SCns treated animals compared to vehicle controls
(repeated measures ANOVA (p≤0.0022). A Bonferroni/Dunn post-hoc analysis at week 16 revealed a significant
difference between hCNS-SCns and vehicle control (p≤0.02). There were no significant differences between hFbs and
either hCNS-SCns or vehicle. (B) Recovery of coordination was significantly increased in hCNS-SCns treated animals
compared to vehicle controls using chi square analysis for observed frequency (p≤0.047, Fisher's Exact Test). No
statistically significant differences were found comparing hFbs with vehicle or hCNS-SCns transplanted animals. Error
bars are not plotted as these bars represent the absolute percentage of animals reaching criteria. (C) CatWalk gait
analysis showed that hCNS-SCns treated animals exhibited significantly increased swing speed compared to vehicle
treated animals (p≤0.04, ANOVA, Fisher's PLSD). (D) von Frey analysis of mechanical allodynia showed no significant
differences between any of the groups (p>0.05 ANOVA).
Source: Salazar DL, Uchida N, Hamers FPT, Cummings BJ, Anderson AJ, 2010 “Human Neural Stem Cells Differentiate and Promote Locomotor
Recovery in an Early Chronic Spinal coRd Injury NOD-scid Mouse Model” PLoS ONE 5(8): e12272. doi:10.1371/journal.pone.0012272
In previous preclinical testing, HuCNS-SC were implanted in mice with spinal contusions at the T-9 vertebrae. Hind-limb
motor recovery was observed 16-18 weeks post-implantation with markers for Oligodendrocyte, Neuronal and Astrocyte
cells of 64.1%, 26.4% and 2.9% respectively. It is believed that remyelation (oligodendrocytes) and/or synapse repair
(neuronal) may be the mechanism of action.
HuCNS-SC Restores Motor Function
Implanted 30 Days After Injury
Elimination of HuCNS-SC Causes
Loss of Motor Function
Source: StemCells Inc.
Source: StemCells Inc.
StemCells Inc. (STEM)
Page 11 of 35
www.LifeTechCapital.com
November 17, 2014
Dry Age-Related Macular Degeneration (Dry AMD) Background & Development
Dry Age-Related Macular Degeneration (Dry AMD)
Age-Related Macular Degeneration (AMD) is a medical condition that causes distortion in the central field of vision,
typically in older adults. AMD occurs in two forms; “Dry” and “Wet”, both of
Diagram of the Eye
which affect the area of the Retina called the Macula, which is responsible for
central vision and seeing fine detail.
Dry AMD is caused by atrophy (called geographic atrophy or GA) of the retinal
pigment epithelial layer (RPE) of the eye. AMD begins in Ruysch’s complex,
which consists of the retinal pigment epithelium, Bruch’s membrane, and the
choroid. When the RPE becomes dysfunctional, cellular waste accumulates
between the RPE layer and Bruch’s membrane in the form of small, yellow
deposits called drusen. The drusen damage the surrounding cells. Loss of
photoreceptor cells (rods and cones) in the macula causes loss of central vision
and difficulty seeing detail.1 There are currently no medical or surgical
treatments available for the Dry form of AMD.
Source: U.S. NIH National Eye Institute
Dry AMD has three stages; early, intermediate and advanced:
 Early AMD: People with early AMD have either small drusen or a few medium-sized drusen. At this stage, patients
may not have any symptoms or vision loss.
 Intermediate AMD: People with this stage of AMD have either many medium-sized drusen or one or more large
drusen. It is still possible for patients to show no symptoms at this stage. Some people see a blurred spot in the center of
their vision. They often need more light to read and to do other tasks.
 Advanced AMD: In addition to drusen, people with advanced dry AMD have a breakdown of light-sensitive cells
supporting tissue in the macula. This breakdown can cause a blurred spot in the center of vision (geographic atrophy).
The disease can progress from this point and the blurred spot can get bigger and darker, taking away a larger area of
straight-ahead vision.2 Advanced AMD also includes the “wet” or neovascular form of AMD where abnormal blood
vessels behind the retina start to grow under the macula.
Macula: Normal & Dry AMD
More than 8 million Americans have some form and stage of AMD making it the
#1 cause of vision loss among Americans 60 yrs and older.3,4 Investors should
note that 85% of all AMD patients currently have the Dry form and 100% of
patients with the more serious Wet form progressed from the initial Dry form.
Currently there are treatment options for the Wet version of the disease such as
anti-angiogenic drugs and photo-dynamic therapy (PDT).
There are currently no FDA-approved treatment options for the larger patient
population of Dry AMD. The U.S. NIH National Eye Institute's Age-Related Eye
Disease Study5 (AREDS) found that taking a specific high-dose formulation of
antioxidants and zinc can reduced the risk of developing advanced age-related
macular degeneration (AMD) by about 25% but did not find that the formulation
provided a benefit to those with early stage AMD. They are currently conducting
an additional study called AREDS2.6
Source: Ophthotech Corporation
StemCells Inc. (STEM)
The U.S. Centers for Disease Control (CDC) estimate that 1.8M Americans have
AMD and another 7.3M are at substantial risk for vision loss from AMD making
it the #1 cause of vision loss among Americans 60 years and older. Investors
should note that 85% of all AMD patients currently have the Dry form and
Page 12 of 35
www.LifeTechCapital.com
November 17, 2014
100% of patients with the more serious Wet form progressed from the initial Dry form. The Dry form can also
cause vision loss without turning into the Wet form.
RESEARCH REFERENCES
1
Overview of Age-Related Macular Degeneration (AMD). Rep. Navigate: Genetech's Advancement of Technician Education in Ophthalmology, 2010.
http://www.retina.org/retina/pdf/Overview-of-AMD.pdf
2
Age-Related Macular Degeneration: What You Should Know. Rep. U.S. Department of Health and Human Ssevice- National Institutes of Health- National Eye
Institute, 2009. http://www.nei.nih.gov/health/maculardegen/nei_wysk_amd.PDF
3
National Institutes of Health, National Eye Institute. Facts about age-related macular degeneration.
http://www.nei.nih.gov/health/maculardegen/armd_facts.asp
4
Jager RD, Mieler WF, Miller JW. Age-related macular degeneration. N Engl J Med. 2008;358:2606-2617.
http://www.nejm.org/doi/full/10.1056/NEJMra0801537
5
Age-Related Eye Disease Study (AREDS) U.S. NIH National Eye Institute http://www.nei.nih.gov/amd/summary.asp
6
Age-Related Eye Disease Study 2 (AREDS2) U.S. NIH National Eye Institute http://clinicaltrials.gov/ct2/show/NCT00345176
Human Clinical Trial of HuCNS-SC® for Dry AMD
UPDATE:
StemCells Inc. stated they expect to initiate a controlled Phase II efficacy proof-of-concept study by year-end 2014
(possibly Q1) and complete enrollment in 2015.
Positive Interim Results Presented: The first interim data from 7 of the 8 patients in the 1st cohort (20/400 vision, 4
patients receiving 200,000 cells and 4 patient receiving 1 million cells) was presented at the Annual Meeting of the
International Society for Stem Cell Research in Vancouver on June 18th. The interim results showed a reduction in
geographic atrophy (GA) of 65% in the treated eye when compared to the expected natural history of the disease as well
as a 70% reduction in the rate of GA versus the control eye. Contrast sensitivity was improved in 4 of the 7 patients and
remained stable in the remaining 3 patients. (see Phase I/II Positive Interim Results)
Enrollment Completed (15 out of 16 planned patients): Based on the successful interim results, on June 20, 214,
StemCells Inc. announced they closed enrollment in the Phase I/II Dry AMD trial with the 1st cohort of 8 patients (20/400
vision, 4 patients receiving 200,000 cells and 4 patient receiving 1 million cells) and 7 patients of 2nd cohort of 20/200 to
20/100 vision receiving 1 million cells. Final results are expected to be released mid-2015.
Phase I/II Positive Interim Results
The Phase I/II was an open-label dose-escalating trial in 16 patients (enrollment completed at 15 patients on June 20,
2014) treating their worst eye with a single injection into the space beneath the retina and results evaluated at
predetermined intervals over a one-year period to assess safety and signs of visual benefit. Final results are expected to
be released mid-2015. Patients will be followed for an additional four years in a separate observational study.
On June 19, 2014, StemCells Inc. discussed their positive interim data in 7 of the 8 patients from the 1st cohort for the
Phase I/II trial of their HuCNS-SC® human neural stem cell platform in dry age-related macular degeneration (Dry AMD)
presented at the International Society for Stem Cell Research (ISSCR) conference. The interim results showed a reduction
in GA (geographic atrophy is the progressive loss of photoreceptors and the retinal pigmented epithelium leading to vision
loss in dry AMD) of 65% in the treated eye when compared to the expected natural history of the disease as well as a 70%
reduction in the rate of GA versus the control eye. In addition, contrast sensitivity (the ability to distinguish shades of light
versus dark) was improved in 4 of the 7 patients and remained stable in the remaining 3 patients.
These results are even more impressive considering it was only a single treatment in patients with severe vision
impairment (best-corrected visual acuity (BCVA) of less than or equal to 20/400). In addition, the 12 month data was
for patients receiving the low-cell dose of 200,000 but the high-cell dose of 1,000,000 had just 6 months of data which
may not have been enough time for the stem cells to fully engraft, migrate and impact function. We look forward to the 12
month data for these patients.
StemCells Inc. (STEM)
Page 13 of 35
www.LifeTechCapital.com
November 17, 2014
We further note that Roche’s (OTCQX: RHHBY) monoclonal antibody lampalizumab completed a controlled Phase II
trial in Dry AMD patients receiving injections either monthly or every 2 month over 18 months showing a reduction in
GA progression of 21% overall, 44% in the subgroup of Compliment Factor I patients and 54% in patients with less
severe 20/50 - 20/100 eyesight. By any measure, StemCells Inc.’s HuCNS-SC showed better results with a 65%-70%
reduction in GA progression after a single treatment in patients with more severe ≤ 20/400 vision impairment.
Our impression is that even with early data in significantly vision-impaired patients it appears that HuCNS-SC is
disease modifying based on the improvements in geographic atrophy and contrast sensitivity.
Title
# of Patients
Ages
Trial Design
Treatment
PHASE I/II HUMAN CLINICAL TRIAL PROTOCOL
Phase I/II Study of the Safety and Preliminary Efficacy of Human Central Nervous System Stem Cells
(HuCNS-SC) Subretinal Transplantation in Subjects With Geographic Atrophy of Age-Related Macular
Degeneration
16 (Male and Female)
50 Years and over
Open Label, Non-Randomized, Safety/Efficacy Study, Single Group Assignment, Sequential Cohorts
Cohort I: 4 patients with best-corrected visual acuity (BCVA) of less than or equal to 20/400 in both eyes
will undergo transplant with 200,000 cells followed by 4 patients who will undergo transplant with 1
million cells
Cohort II: 8 Patients with BCVA of 20/200 to 20/100 who will undergo transplant with 1 million cells.
HuCNS-SC cells transplantation directly into the subretinal space of one eye (Study eye) in a single
transplant procedure
Study subjects will receive oral immunosuppression for three months following transplantation
Primary: Types and frequencies of adverse and serious adverse events 1 year after transplant
Endpoints
Secondary: Assessment of visual function changes from baseline 1 year after transplant (BCVA by the EETDRS acuity test, fluorescein angiography and fundus photography, spectral domain ocular coherence
tomography (OCT), microperimetry, multifocal electroretinography, contrast sensitivity, and a
standardized questionnaire of visual function)
Patients will be enrolled in a separate 4 year long-term follow-up study
 Diagnosis of age-related macular degeneration with geographic atrophy (GA)
Inclusion
 Only patients with a specific degree and extent of GA will be eligible
 No prior or current choroidal neovascularization in either eye
 Prior vitreal or retinal surgery
 Glaucoma
 Atrophic macular disease of any other cause
 Diabetic retinopathy or diabetic macular edema in either eye
Exclusion
 Previous organ, tissue or bone marrow transplantation
 Previous participation in a gene transfer or a cell transplant trial
 Autoimmune disease
 Allergy to tacrolimus, MMF, scopolamine, Moxifloxacin, or Gatifloxacin
 Current or prior malignancy (or is on chemotherapy)
Retina Foundation of the Southwest, Dallas, TX 75231
The Byers Eye Institute at Stanford, Stanford Hospital & Clinics, Palo Alto, CA 94303
New York Eye and Ear Infirmary, NY 10003
Centers
Retina-Vitreaous Associates Medical Group, Los Angeles, CA 90211
Retina Foundation of the Southwest, Dallas, TX 75231
David Birch, PhD Retina Foundation of the Southwest
Investigators Theodore Leng, MD, FACS, Stanford University School of Medicine
Richard Rosen, M.D. New York Eye and Ear Infirmary
StemCells Inc. (STEM)
Page 14 of 35
www.LifeTechCapital.com
November 17, 2014
Thomas Chu, MD, PhD , Retina-Vitreaous Associates Medical Group
David Birch, PhD, Retina Foundation of the Southwest
Source: ClinicalTrials.gov NCT01632527
Additional background can be found at http://www.clinicaltrials.gov/ct2/show/NCT01632527
Pre-Clinical Results for HuCNS-SC® for Retinal Degeneration
Published Pre-Clinical Results
On September 18,2 013, StemCells Inc. announced the publication of preclinical data that confirms their HuCNS-SC®
(purified human neural stem cells) can restore ocular function normally performed by RPE (Retinal Pigmented Epithelial)
cells via phagocytosis of photoreceptor outer segments with preservation of specialized synaptic contacts between
photoreceptors and second order neurons. This data supports HuCNS-SC implantation and functional rescue in
retinal degeneration and StemCells Inc. ongoing human clinical trial (now enrolling 1,000,000 cell high-dose
patients) for Dry Age-Related Macular Degeneration (Dry AMD).
The paper was published in the September 17th issue of Investigative Ophthalmology and Visual Science, the journal of
the Association for Research in Vision and Ophthalmology (ARVO) with the lead author Nicolas Cuenca, PhD, Professor
in the Department of Physiology, Genetics and Microbiology at the University of Alicante, Spain. The paper is available
at: http://www.iovs.org/content/early/recent
HuCNS-SC Engraft in the Subretinal Space of RCS rats and Preserve Photoreceptors
Light microscopy of toluidine blue stained semi-thin retina sections across the HuCNS-SC graft area (A,C) and in
control areas of the same eyes but distal from graft site (B,D) at two time points: P60 (A,B) and P90 (C,D). A
uniform layer of human cells stained with the human specific marker STEM121 were detected on top of OS in the
temporal area of the retina, where they were injected (A,C; arrows), at both time points. The ONL adjacent to the
HuCNS-SC graft is well preserved, with multiple rows of photoreceptor nuclei. The panel on the right (B,D) shows
cross sections of the same retinas but in the area distal to the HuCNS-SC graft. In this region, the ONL is much
StemCells Inc. (STEM)
Page 15 of 35
www.LifeTechCapital.com
November 17, 2014
thinner and many photoreceptors have pyknotic nuclei. DZ: debris zone; OS: outer segments; IS: inner segments;
ONL: Outer nuclear layer; OPL: Outer plexiform layer; INL: inner nuclear layer; IPL: inner plexiform layer; GCL:
ganglion cell layer. Scale bar: 20 μm.
Source: Cuenca, N. et al, “Phagocytosis of photoreceptor outer segments by transplanted human neural stem cells as a neuroprotective
mechanism in retinal degeneration” Invest. Ophthalmol. Vis. Sci. September 17, 2013 IOVS-13-12860
On January 30, 2012, StemCells Inc. announced the publication of preclinical results for their HuCNS-SC® demonstrating
protection of photoreceptors and preservation of vision in an animal model. Investors should note that these results are
relevant to human vision loss. The paper titled “Transplantation of human central nervous system stem cells –
neuroprotection in retinal degeneration” was the cover article for the February issue of the European Journal of
Neuroscience but is available online at (charges apply): http://onlinelibrary.wiley.com/doi/10.1111/j.14609568.2011.07970.x/abstract
The researchers, led by Raymond Lund, Ph.D., Professor Emeritus of Ophthalmology, and Trevor McGill, Ph.D.,
Research Assistant Professor at the Casey Eye Institute, Oregon Health and Science University, summarized their findings
as follows:

HuCNS-SC® prevent retinal disease progression as reflected by functional and anatomical measures and did not
elicit adverse effects in the host RCS rat retina.

A single HuCNS-SC® transplant preserves rod and cone photoreceptors and provides long-term functional benefit
strongly supports human testing in patients suffering from vision loss due to photoreceptor degeneration.

HuCNS-SC® transplantation prevented the typical retinal pathology that normally occurs in the RCS retina over
time, including deformity of the inner retinal layers and ganglion cell loss.

Given the efficacy findings and lack of adverse events in the RCS rat in combination with the results from
ongoing clinical investigations, HuCNS-SC® appear to be a well-suited candidate for cell therapy in retinal
degenerative conditions.
HuCNS-SC® CONE PRESERVATION AT 240 DAYS
Source: McGill T., et al, “Transplantation of human central nervous system stem cells – neuroprotection in retinal
degeneration”, European Journal of Neuroscience, pp. 1–10, 2012 doi:10.1111/j.1460-9568.2011.07970.x
StemCells Inc. (STEM)
Page 16 of 35
www.LifeTechCapital.com
November 17, 2014
HuCNS-SC® INCREASE OF RETINAL COVERAGE AT 120 DAYS
Source: McGill T., et al, “Transplantation of human central nervous system stem cells – neuroprotection in retinal
degeneration”, European Journal of Neuroscience, pp. 1–10, 2012 doi:10.1111/j.1460-9568.2011.07970.x
Photoreceptor deterioration occurs in diseases such as Age-Related Macular Degeneration (AMD) and Retinitis
Pigmentosa (RP) and is the major cause of blindness in the developed countries. So far, there is no approved cure.
Preclinical studies using HuCNS-SC implanted into the sub-retinal space of the eye showed that HuCNS-SC can rescue
vision when injected into the sub-retinal space of rodent model for human retinal degeneration. In November 2008, Dr.
Raymond Lund, a researcher and professor at the Casey Eye Institute at Oregon Health & Science University (OHSU) and
his research team presented successful 180 day preclinical results at the Foundation Fighting Blindness in San Francisco.
In May 2009, Dr. Trevor McGill presented confirmatory follow-up data at 250 days at the annual Association for
Research in Vision and Ophthalmology (ARVO) conference (see table below):
Investigator Conclusions from Preclinical Study using HuCNS-SC for Vision Rescue
 Early sub-retinal transplantation of HuCNSSC’s limits the loss of behaviorally
measured vision, limits the deterioration of
luminance thresholds measured from the
superior colliculus, and delays the death of
photoreceptors in the RCS rat.
 HuCNS-SC transplanted into the sub-retinal
space engraft and survive for at least 220
days post transplantation.
 HuCNS-SC migrate through the subretinal
space and form a continuous layer of cells
by day 60. In about one-third of the animals
sacrificed at day 90, donor cells are also
seen in the inner retina. By day 120, donor
cell migration is seen in all cell layers
 Migration of donor cells along the subretinal
space or into various layers of retina appears
to have no negative effect on vision.
 Declining concentrations of immune
suppression appeared to have no immediate
negative effect on graft survival or efficacy.
Source:T.J. McGill, et. al. “Long-term efficacy of HuCNS-SC transplantation into the subretinal space of RCS Rats” ARVO 5/3/09
Source: R. D. Lund, et. al. “Vision rescue by HuCNS-SC in a rodent model” Foundation Fighting Blindness 11/1/08 UCSF
In October 2009, Dr. Trevor McGill presented additional preclinical data at the Society for Neuroscience 2009 Annual
Meeting titled “Histological analysis of HuCNS-SC differentiation and cone photoreceptor preservation in RCS rats
following sub-retinal transplantation” demonstrating that HuCNS-SC protect cone photoreceptors (light sensing) in the
StemCells Inc. (STEM)
Page 17 of 35
www.LifeTechCapital.com
November 17, 2014
eye from progressive degeneration and preserve visual function long term. The researchers concluded that “subretinal
transplantation of HuCNS-SC may provide significant therapeutic value for clinical cases of retinal degenerative disease.
In particular, the long-term survival of HuCNS-SC and corresponding long-term functional benefit suggest durable
outcomes may be achieved after a single transplantation.”
Alzheimer’s Disease Background & Development Program
UPDATE:
On March 12, 2014, StemCells Inc. announced they are planning to file an IND for a human clinical trial in
Alzheimer’s disease in 2016 or a full year earlier than expected. We remind investors that multiple attempts at
Alzheimer’s drugs have all failed such as Eli Lilly’s (NYSE:LLY) solanezumab and Pfizers (NYSE:PFE) and Johnson &
Johnson’s (NYSE:JNJ) bapineuzumab. There remains no adequate treatment for Alzheimer’s disease.
On July 30, 2013, StemCells Inc. received an initial $3.8M of the $19.3M Alzheimer’s Disease forgivable loan from the
California Institute for Regenerative Medicine (CIRM) for IND-enabling activites for HuCNS-SC in Alzheimer’s Disease.
The goal of the research will be to file an Investigational New Drug (IND) application with the FDA within four years.
According to a RAND study published in The New England Journal of Medicine April 4, 2013, the total U.S. monetary
cost of dementia was between $157B billion and $215B with Medicare paying approximately $11B making Alzheimer’s
disease more costly to the U.S. than either heart disease or cancer.
(see http://www.nejm.org/doi/full/10.1056/NEJMsa1204629 )
On July 17, 2012 StemCells Inc. announced preclinical data presented at the Alzheimer's Association International
Conference 2012 in Vancouver, Canada demonstrating that their proprietary human neural stem cells, HuCNS-SC®
restored memory and enhanced synaptic function in two animal models relevant to Alzheimer's Disease (AD). This is the
first time human neural stem cells have been shown to have a significant effect on memory according to Dr. Frank
LaFerla, a world-renowned expert on Alzheimer’s disease.
Specifically, the paper titled “Restoration of memory in mouse models of Alzheimer disease and neuronal loss: a new
paradigm using human neural stem cell transplantation” showed transplanting HuCNS-SC® into the hippocampus,
statistically increased memory in two different animal models. The hippocampus is critically to the control of memory
and is severely impacted by the pathology of Alzheimer’s. Specifically, hippocampal synaptic density is reduced in AD
and correlates with memory loss. The researchers observed increased synaptic density and improved memory post
transplantation. Importantly, these results did not require reduction in beta amyloid or tau that accumulate in the
brains of patients with AD and account for the pathological hallmarks of the disease.
The research was conducted in collaboration with a world-renowned leader in AD, Frank LaFerla, Ph.D., Director of the
University of California, Irvine (UCI) Institute for Memory Impairments and Neurological Disorders (UCI MIND), and
Chancellor's Professor, Neurobiology and Behavior in the School of Biological Sciences at UCI. Matthew Blurton-Jones,
Ph.D., Assistant Professor, Neurobiology and Behavior at UCI, presented the study results.
Model #1
The triple transgenic Alzheimer’s Disease (3xTg-AD) mouse model is the only model to exhibit both beta amyloid and
tau pathology to mimic human Alzheimer’s Disease. Tests were conducted in a Morris water maze showed that
HuCNS-SC (shown in Green) significantly improved probe trial performance as evidenced by decreased latencies
(A) and increased platform crosses (B) versus control (shown in Blue). Likewise, performance in contextrecognition and place recognition tasks was also significantly improved by HuCNS-SC transplantation (C & D)
versus control.
StemCells Inc. (STEM)
Page 18 of 35
www.LifeTechCapital.com
November 17, 2014
More information on Morris water maze is at http://www.scholarpedia.org/article/Morris_water_maze
Model #2
CaM/Tet-DTA mice which have 80% reduction in hippocampal CA1 neurons mimic extensive hippocampal loss of
Alzheimer’s Disease in humans. To identify potential mechanisms by which HuCNS-SCs influence learning and memory,
they examined Growth Associated Protein 43 (GAP-43) in the hippocampus. GAP-43 is induced in response to injury and
promotes axonal regeneration and plasticity. The researchers found a significant increase in GAP-43 expression in
lesioned mice transplanted with HuCNS-SC (shown in Green).
It was also found that HuCNS-SC transplantation has no effect on beta-amyloid or tau pathology. Thus, HuCNS-SC
transplantation improves cognition via a mechanism that seems to be independent of beta-amyloid or tau
pathology, the two hallmarks of Alzheimer’s Disease.
The final conclusions of the researchers were:

HuCNS-SC engraft, migrate locally and differentiate into both neuronal and glial lineages in two animal models
relevant for AD at the relatively short interval of one-month post-transplant.

Transplantation of HuCNS-SC into the hippocampus significantly improves cognition in both 3xTg-AD and
CaM/Tet-DTA mouse models. The former model reflects tau and beta-amyloid pathology and the later model
reflects induced neuronal loss. Observing efficacy of HuCNS-SC transplantation in these two complimentary
models of AD strengthens the overall results.

Expression of both GAP-43 and Synapsin within the hippocampus of the CaM/Tet-DTA model suggest that
HuCNS-SCs enhance axonal sprouting and endogenous synaptic connectivity, respectively, which may represent
possible mechanisms of action for neuroprotection and cognitive restoration.

Future studies will further address HuCNS-SC-mediated mechanisms of action underlying cognitive restoration
and the feasibility of testing long-term efficacy in these animal models.
StemCells Inc. (STEM)
Page 19 of 35
www.LifeTechCapital.com

November 17, 2014
The results support therapeutic application in AD with a cell (HuCNS-SC) that has an established human safety
record in two completed Phase I trials involving neurodegenerative diseases. The human experience to date
should facilitate the pathway to clinical translation for human disorder with significant unmet need.
The full poster is available at: http://www.stemcellsinc.com/LiteratureRetrieve.aspx?ID=142864
Dr. LaFerla’s original paper titled “Neural stem cells improve cognition via BDNF in a transgenic model of Alzheimer
disease” was published in August 2009 issue of Proceedings of the National Academy of Sciences (PNAS) and the full
paper can be accessed free of charge at http://www.pnas.org/content/106/32/13594.full
Pelizaeus-Merzbacher Disease (PMD) Background & Development Program
Pelizaeus-Merzbacher Disease (PMD) - Myelin Disorder
Pelizaeus-Merzbacher Disease (PMD) is a rare, progressive, degenerative central nervous system disorder in which
coordination, motor abilities, and intellectual function deteriorate. It is a myelin disorder (the fatty covering that wraps
around and protects nerve fibers in the brain) in the group of genetic disorders called leukodystrophies. Specifically, it is
caused by a mutation in the gene that controls the production of a myelin protein called Proteolipid Protein-1 (PLP1). The
2 classifications of PMD are:
Connatal PMD: Symptoms can begin in infancy and include problems feeding, a whistling sound when breathing,
progressive spasticity leading to joint deformities (contractures) that restrict movement, speech difficulties (dysarthria),
ataxia, and seizures. Those affected with connatal Pelizaeus-Merzbacher disease show little development of motor skills
and intellectual function.
Classic PMD: Within the first year of life, those affected with classic Pelizaeus-Merzbacher disease typically experience
weak muscle tone (hypotonia), involuntary movements of the eyes (nystagmus), and delayed development of motor skills
such as crawling or walking. As the child gets older, nystagmus usually stops but other movement disorders develop,
including muscle stiffness (spasticity), problems with movement and balance (ataxia), and involuntary jerking (choreiform
movements).
There is no cure for Pelizaeus-Merzbacher disease, nor is there a standard course of treatment. Treatment is symptomatic
and supportive and may include medication for movement disorders. Severe Pelizaeus-Merzbacher Disease (Connatal
PMD) is often fatal during the first decade of life, typically due to respiratory complications.
The prevalence of Pelizaeus-Merzbacher disease is estimated to be 1 case 500,000 in the United States. It rarely affects
females.
Using HuCNS-SC® to Treat Pelizaeus-Merzbacher Disease (PMD)
Pelizaeus-Merzbacher disease is caused by an inability to form myelin (dysmyelination) due to a lack of the Proteolipid
Protein-1 (PLP1). When the myelin coating is malformed or damaged it prevents the nerves from sending signals.
Oligodendrocyte cells produce the proteins needed to grow and maintain myelin.
StemCells Inc. (STEM)
Page 20 of 35
www.LifeTechCapital.com
Preclinical studies in mice have
shown that implantation with
HuCNS-SC
results
in
differentiation
into
Oligodendrocyte cells which then
produce Proteolipid Protein-1
(PLP1) and Myelin Basic Protein
(MBP).
Myelin Damage in MS
November 17, 2014
HuCNS-SC Produce Myelin (Green)
In
addition
to
PelizaeusMerzbacher Disease (PMD),
other myelin disorders are
Multiple Sclerosis (MS) and
Cerebral Palsy. Myelin disorders
have also been implicated in
Source: Bayer Healthcare /Berlex Inc.
Source: StemCells Inc.
neuropsychiatric diseases such as
ADHD, Autism and Schizophrenia. In addition, a 2007 study from UCLA implicated demyelination as a factor in
Alzheimer’s Disease. (See http://www.alzheimersanddementia.com/article/S1552-5260(07)00026-X/abstract)
Human Clinical Trials of HuCNS-SC® in Pelizaeus-Merzbacher Disease (PMD)
UPDATE
StemCells Inc. Seeks Partner for Future Development: Due to the anticipated time and costs associated with the Phase
II trials in Chronic Spinal Cord Injury and Dry AMD, StemCells Inc. announced on May 29, 2014 that they are seeking a
partner for further development in Pelizaeus-Merzbacher Disease (PMD).
Strong 2 Year Follow-Up Results from Phase I Trial:
On August 2, 2103, StemCells, Inc. presented data showing 24 months after transplantation of HuCNS-SC® cells
(purified human neural stem cells) into 4 patients with Pelizaeus-Merzbacher disease (PMD), the evidence of myelination
is even more pronounced than the 12 months results. The gains in neurological function reported at 12 months were
maintained and there were no safety concerns. PMD patients have a defective gene resulting in insufficient myelin in the
brain with progressive and irreversible loss of neurological function and death. Investors
should note that the results reported by StemCells Inc. represent are unprecedented in PMD
patients suggesting that HuCNS-SC cells are altering the course of the disease.
Phase I Trial Completed – Human Results Confirm Animal Data:
On October 10, 2012 StemCells Inc. announced the rare, simultaneous publication of 2 peerreviewed papers in Science Translational Medicine covering both the successful preclinical
animal studies and the successfully completed Phase I human clinical trial using their
HuCNS-SC® (purified human neural stem cells) for severe myelination disorders.
During the conference call after the market close, Dr. Stephen Back, co-author of the paper “Human Neural Stem Cells
Induce Functional Myelination in Mice with Severe Dysmyelination” described how implanted HuCNS-SC in neonatal
and juvenile mice resulted in new functional myelin, oligodendrocyte stem cell differentiation, improved conductivity and
demonstrated the use of non-invasive MRI scans to determine human myelination improvement. 1 As can be seen,
myelination improvements continued through 7-9 weeks post-implantation in both sets of mice.
The results seen in the animal model were then subsequently validated in humans as discussed by Dr. Stephen Huhn,
co-author of the paper “Neural Stem Cell Engraftment and Myelination in the Human Brain” which described the results
of the successfully completed Phase I clinical trial of HuCNS-SC in severe connatal Pelizaeus-Merzbacher Disease
(PMD), a rare and fatal hypo-myelination disorder in children. 2 As can be seen below, all 4 patients experienced
improvement in myelination relative to changes in the non-transplanted regions in the brain:
StemCells Inc. (STEM)
Page 21 of 35
www.LifeTechCapital.com
November 17, 2014
In addition, small but measureable gains in motor and/or cognitive function in 3 of the 4 patients (Subject 1
remained clinically stable) as can be seen below:
Highlights of the Pelizaeus-Merzbacher Disease (PMD) clinical trial results were:

Progressive and durable donor-cell derived myelination in all 4 patients

Small but measureable gains in motor and/or cognitive function in 3 of the 4 patients (the 4th patient remained
clinically stable)

After 1 year, MRI showed changes compatible with increased myelination in the region of the transplantation.
The MRI signs of myelination persisted even after immunosuppression was stopped at 9 months and in fact, were
also found to progress over time.

The development of new myelin signals is unprecedented in patients with conatal PMD and is consistent with
HuCNS-SC engraftment.
Finally, as in all previous animal and human studies, the HuCNS-SC implantations were safe with no adverse events
attributable to the stem cells. Investors should also note that these results may also be applicable to other
leukodystrophies, as well as more common myelin disorders including transverse myelitis, multiple sclerosis and
periventricular white matter injury seen in Cerebral Palsy.
RESEARCH REFERENCES
Uchida N., et al “Human Neural Stem Cells Induce Functional Myelination in Mice with Severe Dysmyelination” Science Translational Medicine 10 October
2012: Vol. 4, Issue 155, p. 155ra136 http://stm.sciencemag.org/content/4/155/155ra136.abstract
2
Gupta N., et al “Neural Stem Cell Engraftment and Myelination in the Human Brain” Science Translational Medicine 10 October 2012: Vol. 4, Issue 155, p.
155ra137 http://stm.sciencemag.org/content/4/155/155ra137.abstract
1
Trial Site
The trial was conducted at the University of California, San Francisco (UCSF) Children’s Hospital, one of the leading
medical centers in the United States for neonatology, pediatric neurology and neurosurgery.
StemCells Inc. (STEM)
Page 22 of 35
www.LifeTechCapital.com
November 17, 2014
Trial Design
The Phase I trial was designed to assess the safety and preliminary effectiveness of HuCNS-SC® cells as a treatment for
PMD. The trial is expected to enroll 4 patients with connatal PMD, which is the most severe form of the disease. All
patients were transplanted with HuCNS-SC® cells, and immunosuppressed for 9 months. Following transplantation, the
patients were 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. A separate 4 year observational study will be
initiated at the conclusion of this trial. More details about the trial can be found at:
http://clinicaltrials.gov/ct2/show/NCT01005004
Title
# of
Patients
Trial
Design
Ages
Endpoints
Inclusion
Exclusion
Center
Investigator
COMPLETED PHASE I HUMAN CLINICAL TRIAL PROTOCOL
Phase I Study of the Safety and Preliminary Efficacy of Intracerebral Transplantation of HuCNS-SC®
Cells for Connatal Pelizaeus-Merzbacher Disease (PMD)
Four Male
Non-Randomized, Open Label, Uncontrolled, Single Group Assignment, Safety/Efficacy Study
6 Months to 5 Years
Primary: Safety MRI 12-months post-implant Secondary: MRI Myelination MRI 12-months post-implant
Confirmed clinical diagnosis of connatal PMD
Molecular genetic confirmation of mutation in the PLP1 gene
MRI consistent with PMD as interpreted by a qualified neuroradiologist
Other significant congenital brain abnormality not related to PMD
Have previously received an organ, tissue or bone marrow transplantation
Previous participation in gene transfer or cell transplant trial
Presence of neurological signs and symptoms not consistent with PMD
Current or prior malignancy
Prior organ, tissue or bone marrow transplant
University of California, San Francisco, CA 94143
David Rowitch, MD
Source: ClinicalTrials.gov NCT01005004
Marketed Stem Cell Tools & Technologies
UPDATE:
On November 10, 2014, StemCells Inc. granted certain licenses and sold certain assets to Takara Bio Inc. so that it could
sell the “SC Proven” research tools on a worldwide and exclusive basis beginning January 1, 2015. As consideration,
StemCells Inc. will receive $800,000 on or before November 24, 2014. In the transaction, Takara Bio acquired from Stem
Cell Sciences the SC Proven trademarks and business records, as well as field-based license rights under the tools related
patents. The licensed field is limited to the sale of products to researchers and does not include any therapeutic or drug
screening rights or the right to develop and commercialize genetically engineered animals. In connection with this
transaction, StemCells Inc. anticipates winding down the Stem Cell Sciences businesses after disposing of remaining
inventory and complete tech transfer to Takara Bio.
StemCells Inc. (STEM)
Page 23 of 35
www.LifeTechCapital.com
StemCells Inc. markets a portfolio of stem cell research
tools and technologies that includes embryonic stem cells,
induced pluripotent stem (iPS) cells, and tissue-derived
(adult) stem cells with automated platforms and proprietary
reagents for the production and testing of such cells and
their progeny for drug discovery and toxicological
screening applications. StemCells Inc. also develops and
markets cell culture media products under the SC Proven®
brand. StemCells Inc. currently has over 2 dozen products
in their catalog at:
http://www.stemcellsinc.com/Tools-and-Technologies/SCProven-Product-Catalog.htm
November 17, 2014
SC Proven® Products
Source: StemCells Inc.
These include cell culture products that are more refined and less complex cell culture products that are completely free of
serum and other ill-defined components, which are known sources of undesirable agents affecting stem cell performance.
These proprietary cell culture media formulations facilitate the production and differentiation of cells and cell lines
required for use in cell-based assays.
In addition, they market antibody detection reagents for the visualization of human cells, including human stem cell
populations and their progeny. Their library of proprietary antibody reagents that have been extensively used for the
isolation, as well as for the in vitro and in vivo characterization, of human stem cell populations and their differentiated
progeny. These reagents are a powerful tool when combined with their cell-based assay formats and their immunedeficient in vivo rodent models.
StemCells Inc. also markets purified whole stem cell lysates that more accurately test and validate stem cell lines and
associated genes and gene products by providing a reliable off-the-shelf benchmark against which researchers can perform
intra-comparative studies, such as Epigenetic fingerprinting, Southern, Western and Northern blots, PCR, RT-PCR, and
microarrays. Specifically, they offer unique total cell genomic DNA (gDNA), RNA and protein affinity purified from
lysates of homogeneous cell lines propagated in proprietary SC Proven ® cell culture media, including mouse embryonic
stem (ES) cells and mouse ES cell-derived and fetal tissue-derived neural stem (NS) cells.
Finally, StemCells Inc. has expertise and infrastructure for providing cell-based assays for drug discovery and screening,
including automated robotic production and manipulation of stem and progenitor cells with patented gene insertion
technology, used in drug screening and applications in cell and gene therapy. In addition, they have a portfolio of over
twenty patent families claiming a range of technologies relevant to cell processing, reprogramming and manipulation and
gene targeting.
Robotic Delivery
Cell Production and Automation
Dispense Cells to Plate Wells
Pooling Cells
Incubation
Source: StemCells Inc.
On March 20, 2012, StemCells Inc. granted genOway (Paris:ALGEN) a worldwide, exclusive license to StemCells'
Internal Ribosome Entry Site (IRES) technology for use in the development and commercialization of genetically
engineered mice (a non-exclusive license was granted in 2008). StemCells Inc. received a six figure lump sum payment in
lieu of annual maintenance fees, as well as single digit royalties on licensed products and services. The IRES technology
enables the dual expression of a protein of interest and a selectable marker, thereby enabling researchers to genetically
modify any mammalian cell and monitor the activity of a particular gene of interest in living cells or tissues without
blocking the normal function of the gene. The IRES technology is particularly important for evaluating the success of
StemCells Inc. (STEM)
Page 24 of 35
www.LifeTechCapital.com
November 17, 2014
gene knock-outs or knock-ins in stem cells and for the successful creation of transgenic rodent disease models. The IRES
technology has been used to develop hundreds of genetically modified models in the past decade, and the technology is
now considered to be the reference technology for transgene expression in some key rodent animal models, such as
humanized models, reporter models, and cell trafficking models. More information on genOway can be found at
http://www.genoway.com
Intellectual Property
StemCells Inc.’s patent portfolio consists of approximately 47 issued U.S. patents, 250 issued foreign patents and active
patent prosecution in over 15 distinct patent families claiming different types of stem and progenitor cells, cell culture
media, stem cell research tools and techniques, and similar technologies Their issued neural stem cell patents broadly
cover human neural stem cells irrespective of whether they were derived from embryonic, juvenile or adult tissue, or
derived using presently known induced pluripotent stem cell (iPS) technologies. The neural stem and progenitor cell
patents cover (i) compositions of matter, (ii) methods of manufacture (isolation, proliferation, purification, genetic
modification, etc.), and (iii) methods of use, including the use of these cells both as therapeutics and as tools for drug
screening and testing.
StemCells Inc. – Selected U.S. Patents
Number
Owned by StemCells Inc.
Expiration
5,968,829
6,103,530
6,238,922
9/05/17
9/05/17
2/26/19
7,595,193
7,687,266
7,811,818
8,283,164
Human CNS neural stem cells
Human CNS neural stem cells — culture media
Use of collagenase in the preparation of neural stem cell cultures
Enriched neural stem cell populations, and methods for identifying, isolating and
enriching for neural stem cells
Human CNS neural stem cells
Cultures of human CNS neural stem cells
Cultures of GFAP+ nestin+ cells that differentiate to neurons
Enriched neural stem cell populations, and methods for identifying, isolating and
enriching for neural stem cells
Use of collagenase in the preparation of neural stem cell cultures
Drug screening & discovery using enriched neural stem cell populations
Enriched neural stem cell populations, and methods for identifying, isolating and
enriching for neural stem cells
Enriched central nervous system stem cell and progenitor cell populations, and methods
for identifying, isolating and enriching for such populations
Cultures of GFAP nestin cells that differentiate to neurons
Enriched central nervous system stem cell and progenitor cell populations, and methods
for identifying, isolating and enriching for such populations
Propagation and/or Derivation of Embryonic Stem Cells
Pluripotency determining factors and uses thereof
Human liver engrafting cells isolated from adult liver tissue
Liver engrafting cells, assays, and uses thereof
2026
Granted 3/30/10
Granted 10/12/10
Granted 10/9/12
Number
Acquired from NeuroSpheres 10/24/13 (previously Licensed)
Expiration
6,468,794
6,498,018
6,777,233
6,878,543
7,037,719
7,049,141
7,105,150
7,153,686
7,217,565
7,303,912
7,381,561
5,750,376
5,851,832
5,980,885
In vitro genetic modification
In vitro proliferation
Methods for inducing in vivo proliferation of precursor cells
In vitro induction of dopaminergic cells from mammalian central nervous system
5,981,165
multipotent stem cell compositions
6,071,889 Methods for in vivo transfer of a nucleic acid sequence to proliferating neural cells
6,093,531 Generation of hematopoietic cells from multipotent neural stem cells
6,165,783 Methods of inducing differentiation of multipotent neural stem cells
6,294,346 Methods for screening biological agents
6,368,854 Hypoxia-mediated neurogenesis
6,399,369 cDNA libraries derived from populations of non-primary neural cells
6,497,872 Neural transplantation using proliferated multipotent neural stem cells and their progeny
6,638,501 Use of multipotent neural stem cell progeny to augment non-neural tissues
6,897,060 B1 Generation of hematopoietic cells
6,924,142 B2 Hypoxia-mediated neurogenesis assay
7,101,709 Methods of making cDNA libraries, cell screening with cultures of neural stem cells
7,105,342 cDNA libraries derived from populations of non-primary neural cells
StemCells Inc. (STEM)
10/21/19
9/05/17
9/05/17
10/24/20
10/21/19
2/26/19
10/21/19
10/21/19
2019
2021
2024
5/12/15
12/22/15
11/09/16
11/09/16
6/06/17
6/19/18
10/20/18
9/25/18
10/20/18
6/04/19
12/24/19
6/19/18
6/19/18
10/20/18
9/22/12
12/5/12
Page 25 of 35
www.LifeTechCapital.com
7,115,418
7,166,277
7,361,505
Methods of Proliferating Undifferentiated Neural Cells
Remyelination of neurons using multipotent neural stem cell progeny
Multipotent neural stem cell compositions
Number
5,589,376
5,629,159
5,654,183
5,672,499
5,693,482
5,824,489
Licensed from California Institute of Technology
Mammalian neural crest stem cells
Immortalization and disimmortalization of cells
Genetically engineered mammalian neural crest stem cells
Methods for immortalizing multipotent neural crest stem cells
In vitro neural crest stem cell assay
Methods for isolating mammalian multipotent neural crest stem cells
November 17, 2014
11/30/12
1/23/24
2015
Expiration
12/31/13
5/13/14
8/05/14
9/30/14
12/02/14
10/20/15
StemCells Inc. Patent Infringement and Libel Suits Against Neuralstem (Amex:CUR)
In July 2006, StemCells Inc. filed suit against Neuralstem, Inc. in the Federal District Court for the District of Maryland,
alleging that Neuralstem’s activities violate claims in four of the patents exclusively licensed from NeuroSpheres,
specifically U.S. Patent No. 6,294,346 (claiming the use of human neural stem cells for drug screening), U.S. Patent No.
7,101,709 (claiming the use of human neural stem cells for screening biological agents), U.S. Patent No. 5,851,832
(claiming methods for proliferating human neural stem cells), and U.S. Patent No. 6,497,872 (claiming methods for
transplanting human neural stem cells).
In May 2008, StemCells Inc. filed a second patent infringement suit against Neuralstem and its two founders, Karl Johe
and Richard Garr. In this suit, filed in the Federal District Court for the Northern District of California, they allege that
Neuralstem’s activities infringe claims in two patents exclusively license from NeuroSpheres, specifically U.S. Patent No.
7,361,505 (claiming composition of matter of human neural stem cells derived from any source material) and U.S. Patent
No. 7,115,418 (claiming methods for proliferating human neural stem cells). In addition, they allege various state law
causes of action against Neuralstem arising out of its repeated derogatory statements to the public about their patent
portfolio. Also in May 2008, Neuralstem filed suit against StemCells Inc. and NeuroSpheres in the Federal District Court
for the District of Maryland seeking a declaratory judgment that the ‘505 and ‘418 patents are either invalid or are not
infringed by Neuralstem and that Neuralstem has not violated California state law. In August 2008, the California court
transferred the lawsuit against Neuralstem to Maryland for resolution on the merits. In July 2009, the Maryland District
Court granted StemCells Inc.’s motion to consolidate these two cases with the litigation they initiated against Neuralstem
in 2006. Fact discovery has concluded in the cases and the first phase of trial is expected to commence in December
2014.
In April 2008, StemCells Inc. filed an opposition to Neuralstem’s European Patent No. 0 915 968 (methods of isolating,
propagating and differentiating CNS stem cells), because the claimed invention is believed by the company to be
unpatentable over prior art, including the patents StemCells Inc. acquired from NeuroSpheres. In December 2010, the
European Patent Office ruled that all composition claims in Neuralstem’s ‘968 European patent were invalid and
unpatentable over prior art. Neuralstem appealed this decision but recently withdrew its appeal with prejudice.
In October, 2013, StemCells Inc. acquired from NeuroSpheres a patent portfolio consisting of the patents they licensed
from NeuroSpheres on an exclusive worldwide basis, including the six patents that are the subject of the patent
infringement litigation against Neuralstem. StemCells Inc. issued 139,548 shares of unregistered common stock to
NeuroSpheres. All preexisting agreements were terminated and no further milestone and royalty payments are due to
NeuroSpheres.
Financial Model Assumptions
MARKET SIZE
Investors should note that market size estimates for rare diseases or first-in-class treatments such as these are always
difficult and subject to significant error. In addition, untreatable diseases are usually under-diagnosed. Once a treatment
becomes available, patient diagnosis usually increases above historical estimates.
Spinal Cord Injury: According to the University of Alabama National Spinal Cord Injury Statistical Center, there are
approximately 273,000 patients (with a range of 238,000 to 332,000 patients) with spinal cord injury patients in the U.S.
with approximately 44% being paraplegics (or approximately 110,000 patients). The incidence of new spinal cord injury
StemCells Inc. (STEM)
Page 26 of 35
www.LifeTechCapital.com
November 17, 2014
is approximately 40 cases per million population, or about 12,000 patients, per year based on data in the National Spinal
Cord Injury database. Since there have not been any incidence studies in the U.S. since the 1990's it is not known if
incidence has changed in recent years.
Dry AMD: According to the National Eye Institute (part of the NIH), 1.8M people in the U.S. have advanced AMD with
two-thirds having the “wet” form and one-third having the advanced “dry” form (which then progresses to “wet”).
Therefore, we believe the initial addressable population will be the 600,000 advanced dry AMD patients.
Alzheimer’s Disease: According to the Alzheimer's Association, an estimated 5.2M patients in the U.S. have
Alzheimer's disease including approximately 200,000 individuals younger than age 65 who have younger-onset
Alzheimer's. These figures could triple to as many as 16M unless treatment is found.
PRICING
Although highly speculative at this time, existing drug therapy and treatment regimen costs indicate that StemCells
HuCNS-SC could be very high, especially if the clinical trial results are significant and durable.
One possible pricing metric can be derived using existing enzyme replacement drug therapies for rare diseases.
Genzyme’s (NYSE:SNY) Cerezyme for Gaucher Disease (a non-CNS lysosomal disease) cost approximately $200,000
per year while Shire Limited’s (Nasaq:SHPGY) Elaprase for Hunter Syndrome (also a non-CNS lysosomal disease) costs
approximately $375,000 per year. In addition to a comparable drug cost model, one could also look at a comparable
treatment regimen model. A five-year drug treatment regimen for a Gaucher or Hunter patient is approximately $1.0M to
$1.5M. Investors should also note that there may be additional pricing power for StemCells Inc. as the gene-therapy drug,
Glybera® (alipogene tiparvovec) by Netherland-based uniQure B.V. (Nasdaq:QURE) was approved in Europe on
November 2, 2012. A one-time injection of Glybera produces lipoprotein lipase (LPL) enzyme in the ultra-orphan
indication of severe lipoprotein lipase deficiency (familial hyperchylomicronemia) is priced at $1.6M per patient (roughly
5-years of enzyme replacement revenue per patient).
We believe the pricing for chronic spinal cord injury will be similar to the enzyme replacement drug pricing due to the
life-changing nature of the treatment and the assumed long-term reduction in healthcare and societal costs to serve this
patient population. The table below shows the estimated annual costs for these patients:
For Dry AMD, we use comparable pricing from Lucentis® (ranibizumab) and Eylea® (aflibercept) for Wet AMD
approximately $1,800 per injection with an average of 8 injections per year for 8 years or $115,000. Since treatment with
HuCNS-SC could be a once a lifetime treatment, we expect StemCells Inc. could conceivably charge a premium up to
$150,000.
For Alzheimer’s Disease, a RAND study published in The New England Journal of Medicine on April 4, 2013, showed
the total U.S. monetary cost of dementia was between $157B billion and $215B with Medicare paying approximately
$11B making Alzheimer’s disease more costly to the U.S. than either heart disease or cancer. Therefore, we believe an
adequate treatment for Alzheimer’s will have very significant pricing power.
(see http://www.nejm.org/doi/full/10.1056/NEJMsa1204629 )
StemCells Inc. (STEM)
Page 27 of 35
www.LifeTechCapital.com
November 17, 2014
Recent Financing Activity
As of October 31, 2014, there were 68,729,774 shares of common stock outstanding. As of September 30, 2014 there
were 6,936,880 Series A Warrants outstanding with an average exercise price of $1.40. As of October 31, 2014,
approximately $59M remains available under their December 26, 2013 $100M shelf registration.
In July 2014, StemCells Inc. received gross proceeds of $20,000,000 through the sale of 11,299,435 units to two
institutional biotechnology investors, at an offering price of $1.77 per unit. Each unit consists of 1 share of common stock
and a warrant to purchase 0.85 of a share of common stock exercisable six months from the date of issuance at an exercise
price of $2.17. The Warrants are non-transferable and will expire in 13 months on August 17, 2015.
In January 2014, StemCells Inc. received approximately $3,820,000 from the CIRM Loan Agreement to fund their
Alzheimer’s disease program. The loan is forgivable so that the obligation to repay will be contingent upon the success of
HuCNS-SC cells as a treatment for Alzheimer’s disease.
On December 26, 2013, StemCells Inc. filed a $100M mixed shelf registration to have in place for future funding needs of
which up to $27M can be issued through an at-the-market offering filed February 14, 2014.
On October 7, 2013, StemCells Inc. sold 12,845,500 units at a price of $1.45 unit consisting of 12,845,500 shares of
common stock and warrants to purchase 6,422,750 shares of common stock at an exercise price of $1.80 per share
yielding gross proceeds of $18.6M ($17.3M net).
On June 3, 2013, StemCells Inc. entered into an agreement with an institutional investor, under which they can sell up to
$30M of common stock to the institutional investor. The company immediately sold 1,645,639 shares at a purchase price
of $1.823 per share for gross proceeds of $3.0M. The agreement was subsequently terminated as a result of the October 7,
2013 offering.
In April 2013, the California Institute for Regenerative Medicine (CIRM) agreed to provide up to approximately $19.3M
to help fund preclinical development HuCNS-SC cells for Alzheimer’s disease with the goal of filing an Investigational
New Drug application with the FDA within four years. The funding is in the form of a forgivable loan and is expected to
be disbursed periodically by CIRM over the four-year project period subject to preconditions, including the achievement
of certain progress milestones and compliance with certain financial covenants. The loan is unsecured and the term of the
loan is ten years and may be extended under certain circumstances. Initially, the loan will bear interest at the one year
LIBOR rate plus 2% and will increase by 1% each year after year five. Interest will accrue with the first disbursement of
loan funds, but StemCells Inc. will not begin paying interest until year six. Repayment of the principal and any accrued
and unpaid interest will be due and payable at the end of the term. The company can prepay the CIRM loan at their
election, either in whole or in part at any time and without a prepayment fee. In addition, the loan is forgivable so that the
obligation to repay will be contingent upon the success of HuCNS-SC cells as a treatment for Alzheimer’s disease. See
http://www.sec.gov/Archives/edgar/data/883975/000119312513397952/d603090dex1035.htm for details.
In April 2013, StemCells Inc. received approximately $9,900,000 net of fees, under a loan and security agreement with
Silicon Valley Bank for general corporate purposes. The loan has a three-year term and bears interest at an annual rate of
6%. For the first six months, payments will be interest only followed by repayment of principal and interest over a period
of 30 months. There is also a final $1,000,000 fee payment at the end of the term. In connection with the loan agreement,
StemCells Inc. issued to SVB a ten year warrant to acquire 293,531 shares of common stock at an exercise price of
$1.7034 per share. See http://www.sec.gov/Archives/edgar/data/883975/000119312513397952/d603090dex1034.htm for
details.
In February 2013, StemCells Inc. sold 782,755 shares common stock at a price per share of $2.06 for gross proceeds of
approximately $1,616,000 and was offered under their shelf registration statement. Also February 2013, 334,534 Series A
Warrants were exercised at an exercise price of $1.40 per share for gross proceeds of approximately $468,000 and issued
334,534 shares of common stock.
StemCells Inc. (STEM)
Page 28 of 35
www.LifeTechCapital.com
November 17, 2014
Management
Martin McGlynn, President and CEO: Martin McGlynn joined StemCells, Inc. in January of 2001 as President and
Chief Executive Officer and was elected to the Board of Directors on February 6, 2001. Mr. McGlynn has spent several
decades in the life sciences industry in Europe, Canada and the United States. He began his career with Becton Dickinson,
Ireland Ltd., and spent eight years in manufacturing operations. He joined Abbott Labs in 1977 where he held positions as
General Manager, Abbott Ireland Ltd., President and General Manager of Abbott Canada Ltd. and Vice President of
Abbott International Ltd. In 1990, he joined the BOC Group as President of Anaquest, Inc., a global leader in anesthesia
and acute care pharmaceuticals headquartered in New Jersey. Mr. McGlynn joined the biotech industry in 1994 when he
became President and CEO of Pharmadigm, Inc., a private, venture capital-backed company engaged in the research and
development of a new class of anti-inflammatory agents. Mr. McGlynn is a native of Dublin, Ireland. He holds a Bachelor
of Commerce degree from University College, Dublin. He is a former member of the Board of Directors of the
Confederation of Irish Industries (CII) and the Pharmaceutical Manufacturers Association of Canada (PMAC).
Greg Schiffman, CFA & EVP Finance: Mr. Schiffman has over fifteen years of experience leading the financial
operations and strategy of global publicly-traded companies such as Affymetrix and Applied Biosystems. Most recently,
Mr. Schiffman was Executive Vice President and CFO of Dendreon Corporation since 2007, where he had primary
responsibility for capital raising, financial reporting and controls, information technology, and investor relations. Before
entering the healthcare field, Mr. Schiffman held roles of increasing responsibility within Hewlett Packard, where he
served as controller of its European P.C. manufacturing and distribution operations in Grenoble, France, and as
manufacturing manager and controller of its Netmetrix Division. Mr. Schiffman holds a bachelor's degree in accounting
from De Paul University and an MBA from the Kellogg Graduate School of Management at Northwestern University.
Ann Tsukamoto, Ph.D., Executive VP, Scientific and Strategic Alliances: Ann Tsukamoto, Ph.D., was appointed
Executive Vice President, Scientific and Strategic Alliances in June 2013. She previously served as Executive Vice
President, Research and Development. Dr. Tsukamoto has over 20 years experience in stem cell biology and was a codiscoverer of the human hematopoietic stem cell while at SyStemix, Inc., and she played a leading role in the launch of
the clinical research program for the hematopoietic stem cell. Under her direction at StemCells Inc., the scientific team
has discovered the human central nervous system stem cell, a population of human liver engrafting cells and a candidate
pancreas stem cell. Dr. Tsukamoto received her Ph.D. from the University of California, Los Angeles and did postdoctoral
research with Dr. Harold Varmus at the University of California, San Francisco where she worked on the wnt-1 gene,
which is a key player in the stem cell self-renewal pathway. Dr. Tsukamoto is an inventor on six issued U.S. patents
related to the human hematopoietic stem cell.
Stephen Huhn, M.D., F.A.C.S., F.A.A.P., VP, Head of the CNS Clinical Research: Stephen Huhn joined StemCells
Inc. in January 2007 to direct the Company's preclinical and clinical development programs for CNS indications. Prior to
joining the Company, he was Associate Professor of Neurosurgery at Stanford University and Chief of Pediatric
Neurosurgery at the Lucile Salter Packard Children's Hospital. Dr. Huhn earned his M.D. at the University of Arizona in
1987 and completed a residency in Neurosurgery at the University of Maryland in 1993. He completed a fellowship in
Neuro-Oncology at UCSF Medical Center in San Francisco and a fellowship in Pediatric Neurosurgery at Children's
Memorial Hospital in Chicago, Northwestern University. Dr. Huhn is certified by the American Board of Neurological
Surgery and the American Board of Pediatric Neurological Surgery. He is also a Fellow in the American College of
Surgeons and the American Academy of Pediatrics. Dr. Huhn maintains a Consulting Associate Professor appointment
with the Department of Neurosurgery at Stanford University.
Nobuko Uchida, Ph.D., VP, Stem Cell Biology: Dr. Nobuko Uchida is responsible for StemCells Inc.’s discovery
initiative focusing on identifying new stem or progenitor cells, as well as for characterizing their human neural stem cell
and candidate liver and pancreas stem cells. Dr. Uchida has been with StemCells Inc. since 1998, and in 1999 she was
first to identify, by cell surface marker, the human central nervous system stem cell. Dr. Uchida was previously employed
at SyStemix, Inc. as a Research Scientist working on hematopoietic stem cell biology, and has worked in stem cell
biology for the past 15 years. Dr. Uchida obtained her Ph.D. in Cancer Biology from Stanford University and completed
her post doctoral training in the laboratory of Dr. Irving Weissman at the Stanford University School of Medicine.
Ken Stratton , General Counsel: Ken Stratton joined StemCells, Inc. as General Counsel in February 2007. His primary
responsibilities include overseeing the Company’s legal operations and advising the Company and its management and
StemCells Inc. (STEM)
Page 29 of 35
www.LifeTechCapital.com
November 17, 2014
directors on various compliance matters. He also serves as corporate secretary. Mr. Stratton was formerly Deputy General
Counsel at Threshold Pharmaceuticals, Inc., and prior to that was Senior Legal Counsel for the vascular business unit of
Medtronic, Inc., an international medical device manufacturer. Prior to joining industry, Mr. Stratton was a business
attorney in private practice for ten years handling both transactional and litigation matters with corporate law firms in San
Francisco and Palo Alto. He earned both his J.D. and M.B.A. in finance from New York University and his B.A. from the
University of Pennsylvania.
Scientific Founders / Advisory Board
Irving L. Weissman, M.D., is the Karel and Avice Beekhuis Professor of Cancer Biology, Professor of Pathology, and
Professor of Developmental Biology at Stanford University and Director of the Stanford Institute for Cancer/Stem Cell
Biology and Medicine, Palo Alto, California. Dr. Weissman's lab was responsible for the discovery of the first ever
mammalian stem cell, the hematopoietic (blood-forming) stem cell. Dr. Weissman was responsible for the formation of
three stem cell companies, SyStemix, Inc., StemCells, Inc., and Cellerant, Inc. He is a member of the Board of Directors
and Chairman of the Scientific Advisory Boards of StemCells and Cellerant. Dr. Weissman co-discovered the mammalian
and human hematopoietic stem cells and the human neural stem cell. Past achievements of Dr. Weissman's laboratory
include identification of the states of development between stem cells and mature blood cells and identification of the
states of thymic lymphocyte development. More recently, his laboratory at Stanford has developed accurate mouse models
of human leukemias, and has shown the central role of inhibition of programmed cell death in that process. Dr. Weissman
has been elected to the National Academy of Sciences. He has received the Kaiser Award for Excellence in Preclinical
Teaching, the Pasarow Foundation Award, and the Outstanding Investigator Award from the National Institutes of Health.
Fred Gage, Ph.D., is Professor, Laboratory of Genetics, The Salk Institute for Biological Studies, La Jolla, California and
Adjunct Professor, Department of Neurosciences, University of California, San Diego, California. Dr. Gage's lab was the
first to discover the mammalian central nervous system stem cell. His research focus is on the development of strategies to
induce recovery of function following central nervous system (CNS) damage. Dr. Gage is a co-founder of StemCells and
a member of its SAB. Dr. Gage also serves on the Scientific Advisory Board of Ceregene, Inc. Dr. Gage has been the
recipient of numerous awards, including the 1993 Charles A. Dana Award for Pioneering Achievements in Health and
Education, the Christopher Reeves Medal, the Decade of the Brain Medal, the Max-Planck research Prize, and the
Pasarow Foundation Award. In 2003, Professor Gage was elected to the National Academy of Sciences.
David J. Anderson, Ph.D., is Professor of Biology, California Institute of Technology, Pasadena, California and
Investigator, Howard Hughes Medical Institute. His laboratory was the first to isolate a multipotent, self-renewing, stem
cell for the peripheral nervous system, the first to identify instructive signals that promote the differentiation of these stem
cells along various lineages, and the first to accomplish a direct purification of peripheral neural stem cells from
uncultured tissue. Dr. Anderson's laboratory also was the first to isolate transcription factors that act as master regulators
of neuronal fate. More recently, he has identified signals that tell a neural stem cell to differentiate to a glial cell rather
than a neuron. Dr. Anderson is a co-founder of StemCells and a member of its SAB. Dr. Anderson also serves on the SAB
of Allen Institute for Brain Science. He has held a presidential Young Investigator Award from the National Science
Foundation, a Sloan foundation Fellowship in Neuroscience, and has been Donald D. Matson lecturer at Harvard Medical
School. He has received the Charles Judson Herrick Award from the American Association of Anatomy, and the 1999 W.
Alden Spencer Award in Neurobiology from Columbia University
Board of Directors (Non-Management)
John J. Schwartz, Ph.D., John J. Schwartz, Ph.D., was elected to the Board of Directors of the Company in December
1998 and was elected Chairman of the Board at the same time. He is the former President and Chief Executive Officer of
SyStemix, Inc. He is currently President of Quantum Strategies Management Company, a registered investment advisor
located in Atherton, California. Prior to his positions at SyStemix, he served as Assistant Professor of Physics, and
subsequently as Vice President and General Counsel, at Stanford University. Dr. Schwartz graduated from Harvard Law
School in 1958 and received his Ph.D. degree in physics from the University of Rochester.
StemCells Inc. (STEM)
Page 30 of 35
www.LifeTechCapital.com
November 17, 2014
Eric H. Bjerkholt, Mr. Bjerkholt is Senior Vice President and CFO of Sunesis Pharmaceuticals, Inc. At Sunesis, he leads
the financial operations, public and investor relations, and treasury activities of the South San Francisco small molecule
biopharmaceutical company. Before joining Sunesis, Mr. Bjerkholt served as Senior Vice President and CFO of
IntraBiotics Pharmaceuticals, Inc., where he completed multiple financings. Earlier in his career, Mr. Bjerkholt cofounded LifeSpring Nutrition, Inc., a privately held nutraceutical company. From 1990 to 1997, Mr. Bjerkholt was an
investment banker at J.P. Morgan & Co., Inc., where he founded its Western U.S. Healthcare Investment Banking
Practice, leading many equity and financing transactions for biotechnology and other healthcare and life sciences
companies. Mr. Bjerkholt holds an M.B.A. from Harvard Business School and a Cand. Oecon degree in economics and
econometrics from the University of Oslo, Norway.
R. Scott Greer, R. Scott Greer was elected to the Board of Directors of the Company in June 2010, and was
simultaneously appointed to Chair the Company's Strategic Transactions Committee. Mr. Greer is currently a principal
and managing director of Numenor Ventures LLC. Previously, Mr. Greer was founder of Abgenix, Inc., a biotechnology
company that pioneered the development of antibodies as therapeutics, and served as its Chief Executive Office from its
inception in 1996 until 2002, and as its Chairman from 2000 until 2006. Abgenix was acquired by Amgen in 2006 for
$2.2 billion. Prior to Abgenix’s formation, Mr. Greer held senior management positions at Cell Genesys, Inc. including
Senior Vice President, Corporate Development and Chief Financial Officer, and held various positions at Genetics
Institute (acquired by Wyeth). Mr. Greer currently serves as Chairman of Acologix, a development stage biotechnology
company, and is also on the board of Nektar Therapeutics and BAROnova. In the past, Mr. Greer served on several other
public and private company boards, including Sirna Therapeutics (acquired by Merck), where he served as Chairman of
the Board, Affymax, Anaptys Biosciences, Illumina, Chimeros, Inogen, and CV Therapeutics (acquired by Gilead
Sciences). Mr. Greer received a B.A. in Economics from Whitman College and an M.B.A. from Harvard University, and
was also a Certified Public Accountant.
Ricardo Levy, Ph.D., Ricardo B. Levy, Ph.D. is Chairman of the Board of Catalytica Energy Systems, Inc., and has been
a member of its Board of Directors since June 1995, when the company was formed as a subsidiary of Catalytica, Inc. He
also served as director of Catalytica Pharmaceuticals Inc. from 1995 to 2000. Dr. Levy was a founder of Catalytica, Inc. in
1974, serving as Chief Operating Officer from 1974 until 1991 and President and Chief Executive Officer until December
2000, when Catalytica, Inc. and Catalytica Pharmaceuticals Inc. were sold to DSM N.V. Before founding Catalytica, Inc.,
Dr. Levy was a founding member of Exxon's chemical physics research team, and prior to that served as Chief Executive
Officer of Sudamericana C.A. in Quito, Ecuador. He currently also serves on the Board of Directors of Pharmacopeia, Inc.
and NovoDynamics, Inc. Dr. Levy holds an M.S. from Princeton University, a Ph.D. in chemical engineering from
Stanford University and is an alumnus of Harvard University's Executive Management Program.
Irving L. Weissman, M.D., is the Karel and Avice Beekhuis Professor of Cancer Biology, Professor of Pathology, and
Professor of Developmental Biology at Stanford University and Director of the Stanford Institute for Cancer/Stem Cell
Biology and Medicine, Palo Alto, California. Dr. Weissman's lab was responsible for the discovery of the first ever
mammalian stem cell, the hematopoietic (blood-forming) stem cell. Dr. Weissman was responsible for the formation of
three stem cell companies, SyStemix, Inc., StemCells, Inc., and Cellerant, Inc. He is a member of the Board of Directors
and Chairman of the Scientific Advisory Boards of StemCells and Cellerant. Dr. Weissman co-discovered the mammalian
and human hematopoietic stem cells and the human neural stem cell. Past achievements of Dr. Weissman's laboratory
include identification of the states of development between stem cells and mature blood cells and identification of the
states of thymic lymphocyte development. More recently, his laboratory at Stanford has developed accurate mouse models
of human leukemias, and has shown the central role of inhibition of programmed cell death in that process. Dr. Weissman
has been elected to the National Academy of Sciences. He has received the Kaiser Award for Excellence in Preclinical
Teaching, the Pasarow Foundation Award, and the Outstanding Investigator Award from the National Institutes of Health.
Alan Trounson, Ph.D., Dr. Trounson has been the recipient of over 30 awards and distinctions for his scientific work,
including pioneering work in the fields of in-vitro fertilization and stem cells. As part of his academic research, Dr.
Trounson pioneered a new stem cell biology approach for the treatment of a broad range of diseases and injuries, which
was awarded the first ever Australian Center of Excellence in Biotechnology grant worth $110 million dollars. Dr.
Trounson’s previous academic positions include Scientific Director of Monash IVF Pty Ltd., Personal Chair in Stem Cell
Science and Director of the Monash Immunology and Stem Cell Laboratories, Deputy Director/Director of the Monash
Institute of Reproduction and Development, Director of the Centre of Early Human Development, Faculty of Medicine,
and Personal Chair of Obstetrics and Gynaecology-Pediatrics at Monash University in Melbourne, Australia. He has
StemCells Inc. (STEM)
Page 31 of 35
www.LifeTechCapital.com
November 17, 2014
founded a number of companies including Infertility Medical Center Pty Ltd./Monash IVF Pty Ltd., IVF Australia
Corp/IntegraMed Corp (US), Sydney IVF Pty Ltd./Genea Pty Ltd., Maccine Pte Ltd and the Australian Stem Cell Center
Ltd. He established two foundations, the Low Cost IVF Foundation for the treatment of infertile women in Africa and for
the treatment of patients with HIV, to avoid vertical transmission to children and the Friends of Low Cost IVF (US).
Risks
Some of the operational and financial risks to StemCells Inc. are:
 FDA and Regulatory risks: All of StemCells Inc.’s products are ultimately reliant on approvals by the U.S.
FDA and other national regulatory bodies. There can be no guarantee of timely or definite regulatory
approvals for any of their pipeline products.
 Public Policy: StemCells Inc. uses human fetal-derived stem cells in their products. Although they are not
embryonic stem cells, a negative public policy shift could adversely affect some or all stem cell development
companies.
 Patent Litigation: StemCells Inc. is currently in active litigation against NeuralStem on a number of
infringement of intellectual property claims. In addition, the stem cell space is relatively new and patent
issues could arise at any time, requiring StemCells Inc. to spend time and money on defending their
intellectual property rights up to and including adverse judgments against StemCells Inc.
 Long Time-Horizons: Due to the “first-in-class” nature of StemCells Inc. HuCNS-SC and other stem cell
products, the development timelines may be significantly longer than typical drug development programs.
This is a result of ensuring safety and efficacy of their unique biological stem cells implanted directly into the
central nervous system for which there is little historical precedent in humans.
 Need to Raise Additional Funds: While StemCells Inc. has sufficient cash for near-term development, we
believe that StemCells Inc. will be required to raise additional funds through the issuance of stock which
would be dilutive to existing shareholders and could potentially affect the share price. We have included
estimates of future share issuance in our financial model but there can be no guarantee that our estimates are
accurate.
 Sector Rotation: StemCells Inc. is a small biotechnology development company in the stem cell space often
kept in a portfolio with similar companies. In such cases, a significant event for one company may have a
material impact on the valuation of all similar companies regardless of their unique qualities.
StemCells Inc. (STEM)
Page 32 of 35
www.LifeTechCapital.com
StemCells Inc. (STEM)
November 17, 2014
Page 33 of 35
www.LifeTechCapital.com
November 17, 2014
DISCLOSURES
Ratings and Price Target Changes over Past 3 Years
Initiated February 2, 2010 – Strong Speculative Buy - Price Target $2.20 ($22.00)
Update April 8, 2011 – Strong Speculative Buy - Price Target $1.60 ($16.00)
Update July 6, 2011 – Strong Speculative Buy - Price Target $8.00 (1:10 Split 7/6/11)
Update March 27, 2012 – Strong Speculative Buy - Price Target $4.50
Downgrade September 18, 2014 – Neutral - Price Target $2.00
Analyst Certification: I, Stephen M. Dunn, the author of this research report certifies that a.) All of the views expressed in this report
accurately reflect my personal views about any and all of the subject securities or issuers discussed b.) No part of my compensation is
directly or indirectly related to the specific recommendations or views expressed in this research report and c.) Analysts may be eligible
to receive other compensation based upon various factors, including total revenues of the Firm and its affiliates as well as a portion of
the proceeds from a broad pool of investment vehicles consisting of components of the compensation generated by investment banking
activities, including but not limited to shares of stock and/or warrants, which may or may not include the securities referenced in this
report.
DISCLOSURES
Does the Analyst or any member of the Analyst’s household have a financial interest in any securities of the Company?
Does the Analyst or any member of the Analyst's household or Firm serve as an officer, director or advisory board member of
the Company?
Has the Analyst or any member of the Analyst’s household received compensation directly or indirectly from the Company in the
previous 12 months?
Does the Firm or affiliates beneficially own ≥1% of the Company’s common stock?
Has the Firm or affiliates received investment banking services compensation in previous 12 months?
Has the Firm or affiliates received non-investment banking securities-related services compensation in previous 12 months?
Does the Firm or affiliates expect to receive or intend to seek investment banking compensation in next 3 months?
Has the Firm or affiliates received non-securities services compensation in previous 12 months?
Does the Firm or affiliates make a market in the Company’s securities?
NO
NO
NO
NO
NO
NO
YES
NO
NO
The Firm and/or its directors and employees may own securities of the company(s) in this report and may increase or decrease
holdings in the future. The Firm, its officers, directors, analysts or employees may effect transactions in and have long or short positions
in the securities (or options or warrants with respect thereto) mentioned herein. The Firm may effect transactions as principal or agent
in the securities mentioned herein.
Ratings Definitions: 1) Strong Buy: the stock is expected to appreciate and produce a total return of at least 40% over the next 12-18
months; 2) Buy: the stock is expected to appreciate and produce a total return of at least 20% over the next 12-18 months; 3) Strong
Speculative Buy: the stock is expected to appreciate and produce a total return of at least 40% over the next 12-18 months but the
volatility and investment risk is substantially higher than our "Strong Buy" recommendation; 4) Speculative Buy: the stock is
expected to appreciate and produce a total return of at least 20% over the next 12-18 months but the volatility and investment risk is
substantially higher than our "Buy" recommendation; 5) Neutral: the stock is fairly valued for the next 12-18 months; 6) Avoid/Sell:
the stock is expected to decline at least 20% over the next 12-18 months and should be avoided or sold if held; 7) Under Review: the
previous rating and/or price target is suspended due to a significant event which now requires additional analysis and the previous
rating and/or price target cannot be relied upon; 8) Not Rated: the stock has too much business or financial uncertainty to form an
investment conclusion or is currently in the process of being acquired and 9) Restricted: coverage cannot be initiated or has been
temporarily suspended to comply with applicable regulations and/or firm policies in certain circumstances such as investment banking
or an advisory capacity involving the company.
StemCells Inc. (STEM)
Page 34 of 35
www.LifeTechCapital.com
LifeTech Capital
Research
Ratings Distribution
Strong Buy
Strong Speculative Buy
Buy
Speculative Buy
Neutral
Avoid/Sell
Under Review
Not Rated
Restricted
Total
Research
Coverage
% of Total
0%
50%
0%
0%
25%
25%
0%
0%
0%
100%
Investment
Banking
% of Total
0%
50%
0%
0%
0%
0%
0%
0%
0%
25%
FINRA
RULE 2711
Ratings Distribution
Buy
Hold/Neutral
Sell
Total
November 17, 2014
Research
Coverage
% of Total
50%
25%
25%
100%
Investment
Banking
% of Total
50%
0%
0%
25%
Legal Disclaimer
THE INFORMATION IN THIS REPORT IS NOT INTENDED TO BE USED AS THE BASIS FOR INVESTMENT DECISIONS AND
SHOULD NOT BE CONSTRUED AS ADVICE INTENDED TO MEET THE PARTICULAR INVESTMENT NEEDS OF ANY INVESTOR.
THE INFORMATION IN THIS REPORT IS NOT A REPRESENTATION OR WARRANTY AND IS NOT AN OFFER OR SOLICITATION
OF AN OFFER TO BUY OR SELL ANY SECURITY.
TO THE FULLEST EXTENT OF THE LAW, LIFETECH CAPITAL, AURORA CAPITAL LLC, OUR OFFICERS, ADVISORS, AND
PARTNERS WILL NOT BE LIABLE TO ANY PERSON OR ENTITY FOR THE QUALITY, ACCURACY, COMPLETENESS,
RELIABILITY OR TIMELINESS OF THE INFORMATION PROVIDED IN THIS REPORT, OR FOR ANY DIRECT, INDIRECT,
CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF INFORMATION
PROVIDED TO ANY PERSON OR ENTITY (INCLUDING BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES,
TRADING LOSSES AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS
INFORMATION).
Investors are expected to take full responsibility for any and all of their investment decisions based on their own independent research
and evaluation of their own investment goals, risk tolerance, and financial condition. Investors are further cautioned that Small-Cap and
Micro-Cap stocks have additional risks that may result in trading at a discount to their peers. Liquidity risk, caused by small trading
floats and very low trading volume can lead to large spreads and high volatility in stock price. Small-Cap and Micro-Cap stocks may
also have significant company-specific risks that contribute to lower valuations. Investors need to be aware of the higher probability of
financial default and higher degree of financial distress inherent in the Small-Cap and Micro-Cap segments of the market.
The information, opinions, data, quantitative and qualitative statements contained in this report have been obtained from sources
believed to be reliable but have not been independently verified and are not guaranteed as to accuracy nor does it purport to be a
complete analysis of every material fact regarding the company, industry, or security. The information, opinions, or recommendations
are solely for advisory and informational purposes and are only valid as of the date appearing on the report and are subject to change
without notice.
Statements in this report that are not historical facts are “forward-looking statements” that involve risks and uncertainties. “Forward
looking statements" as defined under Section 27A of the Securities Act of 1933, Section 21B of the Securities Exchange Act of 1934
and the Private Securities Litigation Act of 1995 include words such as “opportunities,” “trends,” “potential,” “estimates,” “may,” “will,”
“could,” “should,” “anticipates,” “expects” or comparable terminology or by discussions of strategy. These forward looking statements
are subject to a number of known and unknown risks and uncertainties outside of the company's or our control that could cause actual
operations or results to differ materially from those anticipated. Factors that could affect performance include, but are not limited to,
those factors that are discussed in each profiled company's most recent reports or registration statements filed with the SEC. Investors
should consider these factors in evaluating the forward looking statements included in this report and not place undue reliance upon
such statements. Investors are encouraged to read investment information available at the websites of the SEC at http://www.sec.gov
and FINRA at http://www.finra.org.
Copyright © 2014 LifeTech Capital. All Rights Reserved.
LifeTech Capital is a division of Aurora Capital LLC member FINRA / SIPC
Boca Raton Office
4431 Woodfield Blvd.
Boca Raton, FL 33432
Tel: 561-988-9129
Fax: 561-988-9129
StemCells Inc. (STEM)
New York Office
17 Park Avenue #201
New York, NY 10016
Tel: 917-834-7206
Fax: 415-887-7814
Page 35 of 35