StemCells will acquire the operating subsidiaries and certain related assets of Stem Cell Sciences (SCS) for 2,650,000 shares of StemCells common stock and approximately $715,000 in cash.

Under the terms of the asset purchase agreement, StemCells will acquire substantially all of the operating assets and liabilities of SCS, including its research and development operations in Cambridge, UK and near Melbourne, Australia, and substantially all of its intellectual property portfolio. It is expected that most of SCS’ approximately 20 full-time current staff will remain with StemCells upon completion of the transaction.

“The industrial logic of this acquisition is compelling,” said Martin McGlynn, President and CEO of StemCells. “StemCells has established itself as a world leader in tissue-derived stem and progenitor cells for therapeutic uses, while Stem Cell Sciences has focused on non-therapeutic applications for embryonic and tissue derived stem cells, such as cell-based assays for drug discovery and screening. This proposed acquisition will combine three distinct stem cell platforms, adult, embryonic and iPS cells, for both therapeutic and drug discovery applications, and will position StemCells to diversify and pursue near-term commercialization opportunities while continuing to develop our cell-based therapeutic products.”

StemCells, which is focused on the discovery and development of tissue-derived cellular products for therapeutic uses.

StemCells’ product development programs seek to repair or repopulate CNS and liver tissue that has been damaged or lost as a result of disease or injury. StemCells has pioneered the discovery and development of HuCNS‑SC ® cells, its highly purified, expandable population of human neural stem cells.

In January 2009, StemCells completed a six patient Phase I clinical trial of its proprietary HuCNS-SC product candidate as a treatment for neuronal ceroid lipofuscinosis (NCL), a rare and fatal neurodegenerative disease that affects infants and young children.

StemCells has also received approval from the US Food and Drug Administration (FDA) to initiate a Phase I clinical trial of the HuCNS-SC cells to treat Pelizaeus-Merzbacher Disease (PMD), also a rare and fatal brain disorder that mainly affects young children.

StemCells owns or has exclusive rights to approximately 50 issued or allowed U.S. patents and more than 150 granted or allowed non-U.S. patents.

Stem Cell Sciences is a UK-based company focused on commercializing applications of stem cell technologies for drug discovery and regenerative medicine research.

SCS is now focusing on building revenues through the sale of products, collaborative research and licensing deals with international biotechnology and pharmaceutical companies. SCS has a substantial portfolio of patents and patent applications in both adult and embryonic stem cell fields.

SCS has been active in the stem cell research field since 1994, principally focused on technologies to grow, differentiate, and purify adult and embryonic stem cells. These include technologies to permit the generation of highly purified stem cells and their differentiated progeny (specialized tissue cell types) for use in genetic, pharmacological and toxicological screens.

Moreover, these technologies may be able to provide pure populations of appropriate cell types for transplantation therapies in the future. SCS has its main research base and headquarters in Cambridge, UK with a second research base in Monash near Melbourne, Australia.