AIM - Preliminary Results for the year ended 31 December 2006

7/02/2007

Stem Cell Sciences plc, the global biotechnology company focused on the commercialisation of stem cells and stem cell technologies in research and novel cell-based therapies, is pleased to announce preliminary results for the year ended 31 December 2006.

Highlights

Revenues generating in three of four SCS business units:
* SC Proven® - supply of growth formulations and other reagents for stem cell-based research
* SC Services - custom engineering and supply of cells for drug discovery and development
* SC Licensing - provides access to proprietary SCS technologies
Exclusive license agreement signed with Millipore Corporation to develop and market the Company's serum free media for the growth of human embryonic stem cells ("hESCs") - a further licensing deal between the two companies. HEScGRO medium is the first commercially available animal component free medium for human ES growth
Two new licensing deals signed with major pharmaceutical companies including one evaluation license and one non-exclusive research license. Both licenses provide SCS with up-front fees, the latter also providing milestone payments and SCS technology licensing options to improvements in SCS technology.
Opening of the new automated stem cell production facility at the Babraham Research Campus in Cambridge (UK), enabling the Company to grow and supply its novel stem cell based drug discovery and development assays for the world pharmaceutical industry. The facility also includes a state of the art robotic cell culture machine, the CompacT SelecT™.
Strengthening of the Board with appointment of Jeremy Scudamore and David Dodd as Non-Executive Directors. Subsequent to his appointment, David Dodd was appointed Non-Executive Chairman effective 1 January 2007 with Michael Dexter continuing to serve as Senior Independent Non-Executive Director. David's significant commercial and corporate life sciences experience, having held a number of executive positions with companies such as Serologicals Corporation, Solvay Pharmaceuticals, Wyeth, Bristol-Myers Squibb and Abbott Laboratories, and excellent track record in US commercial and financial markets will be instrumental in taking Stem Cell Sciences forward to the next stage of its development.
Expansion of US academic and commercial networks via U.S. subsidiary SCS llc (San Francisco, CA). SCS llc is focused on building sustainable academic and commercial collaborations throughout North America.
Successful co-applicant in the European Commission approved 'ESTOOLS' programme, a world leading €12 million stem cell research programme involving both academic and commercial researchers. Stem Cell Sciences is one of three commercial partners taking part in this Framework Programme (FP) VI initiative which is being led by the University of Sheffield.
Shareholders' approval of proposed dual listing on the Australian Stock Exchange ("ASX") in the first half of 2007 to raise up to AUS$10m, whilst continuing to trade on the Alternative Investment Market of the London Stock Exchange ("AIM")

Peter Mountford, President and CEO of SCS, commenting on the outlook for 2007, said:

"The Company made significant progress in pursuing its strategy, particularly strengthening the infrastructure and business development. Importantly, with these solid foundations, and the successful in-licensing of several new products, SCS expects to see revenue growth in the coming year. The Board continues to be optimistic on the opportunities available to SCS and looks forward to an exciting 2007."

- Ends -

For further information, please contact:

Stem Cell Sciences plc
0131 662 9829

Peter Mountford, President and CEO
Hugh Ilyine, Vice President and Chief Operating Officer
Sue Furber, Director of Finance & Company Secretary

Weber Shandwick Financial
020 7067 0700

Louise Robson
James White

About Stem Cell Sciences plc

Stem Cell Sciences plc (SCS, AIM: STEM) is a global biotechnology company, established in Melbourne, Australia in 1994, providing products in the burgeoning stem cell research and drug discovery markets, in addition to the targeted development of cell-based therapies for neurodegenerative disease and injury.

The Company has established a leading intellectual property (IP) and technology portfolio that enables the commercial application of stem cells in drug discovery, providing the Company with early-stage revenue streams and technology development for at scale cell production of SCS cell-based therapeutics. SCS principal focus is in neurological disease. Revenues in the neurotech market, including pharmaceuticals, devices and diagnostics, grew 10% in 2005 to US$110 billion Neurotech Insights, Volume 2/3 April 30 2006.

SCS operates as a group of independent operations with laboratories in Scotland, Japan and Australia, each of which is affiliated with an academic centre of excellence. These include the Institute of Stem Cell Research (ISCR), Edinburgh, UK, RIKEN Centre for Development Biology, Kobe, Japan and the Australian Stem Cell Centre, Melbourne, Australia.

SCS has four business units focused on key sustainable business strategies.

SC Proven® provides cell culture media (liquid formulations) and reagents that enable the growth and differentiation of stem cells. The first commercially available product, a novel, serum free, stem cell growth medium, has been exclusively licensed for manufacture and marketing to Chemicon, part of Millipore Corporation.

SC Licensing licenses SCS proprietary technologies, such as Internal Ribosome Entry Site (IRES) and Stem Cell Selection, for application in laboratory-based research and discovery. SCS has licensed technology to major pharmaceutical and biotechnology companies including Pfizer, Sanofi Aventis, GSK, Deltagen Inc and Lexicon Genetics Inc.

SC Services provides specialised stem cell production for basic research and drug discovery, including high-throughput applications.

SC Therapies' goal is to develop safe and effective cell-based therapies for currently incurable diseases. SCS is conducting preclinical evaluations of its neural stem cell lines in a number of therapeutic applications. The first preclinical programme being undertaken by SCS is in spinal cord injury repair. Its Japanese affiliate SCS KK will conduct preclinical studies for the treatment of Duchenne Muscular Dystrophy in 2007-8. For further information on the company please visit: www.stemcellsciences.com

Stem Cell Sciences plc Preliminary Results for the year ended 31 December 2006

("Stem Cell Sciences", "SCS", "the Company" or "the Group")

Chairman's Statement

I am pleased to provide you with this update on the continued successful developments of Stem Cell Sciences during 2006, our first full year as a public company.

SCS is focused on the commercial application of stem cell biology, achieving current revenues through the application of our technologies in stem cell research and drug discovery, while continuing to invest our efforts long-term into the development of novel stem cell therapies for targeted neurological diseases.

This year has been highly significant for SCS operationally and in terms of growing the business. During the year the Company met a number of milestones including new agreements and collaborations, the launch of the first commercial product and the opening of new sites in Cambridge, UK and California, USA.

The opening of the new automated stem cell production facility in December 2006 at the Babraham Research Campus in Cambridge enables the Company to grow and supply its novel stem cell-based drug screens and assays for the world pharmaceutical industry using state of the art robotic cell culture equipment.

The Company also established a U.S. subsidiary in San Francisco, California which is focused on building sustainable research, development and commercial collaborations throughout North America in order to expand its global presence and pursue further developments in the US market.

Under the Company's exclusive license agreement with Millipore Corporation, the first commercial product, ESGRO Complete™, was launched in February 2006. Later in the year the Company signed a second exclusive agreement with Millipore to develop and market the Company's serum free media for the growth of human embryonic stem cells ("hESCs"). This product, HEScGRO™ was launched in January 2007.

In November the SC Therapies unit commenced the Company's therapeutic programme in spinal cord injury signing a collaboration with the Regenerative Medicine Institute at the National University of Ireland, Galway, with the Group's NS cells entering preclinical testing for spinal cord injury at the Institute.

As part of Stem Cells Sciences' ongoing involvement in Government initiatives the Company announced its participation in the European Commission approved 'ESTOOLS' programme, a world leading €12 million stem cell research programme involving both academic and commercial researchers. Stem Cell Sciences is one of three commercial partners taking part in this Framework Programme ("FP") VI initiative which is being led by the University of Sheffield.

Stem cells hold great promise to deliver longer-term potential as safe and effective treatments for a variety of human illnesses that are currently without cures. The Company aims to be a key provider of the cellular materials needed for these therapies. By using stem cells, scientists are already able to investigate and better understand normal body processes and those of human disease, by testing specific genes to identify their role in cells, and to discover and test new drugs in a representative ‘human' environment. The ability to grow and use stem cells in the laboratory is accelerating basic research and will ensure faster and more successful drug discovery and development. The key challenges for the successful application of stem cells are robust and reproducible growth and differentiation (generation of pure populations of the desired cell type). Stem Cell Sciences has developed, and continues to methodically develop, the products and technologies needed to overcome these challenges. During 2006, the Company initiated the therapeutic evaluation of its proprietary NS cells in several areas of neurological diseases including, collaborations and evaluations to test cells in animal models of spinal cord injury, age-related macular degeneration and Duchenne's Muscular Dystrophy.

The Company recognises that the development of new cell-based therapies will require the support and participation of multiple organisations and individuals including governments, universities, clinicians, financiers, patients and patient support groups, on a world-wide and collaborative basis. To this purpose, the Company continues to build a global network of operations to facilitate interaction and access to key contributing academic and commercial organisations around the world.

In addition to achieving commercial progress and in several areas of research and development, the Company continued to strengthen its board of Directors through new additions and organising for the long-term commercial success. In July 2006, Jeremy Scudamore joined our board as a Non-Executive Director, which was followed by my joining in October, 2006 and subsequent appointment as Non-Executive Chairman on 1 January 2007.

It is an honour to work with my fellow board members and the management team in continuing to successfully develop Stem Cell Sciences. On behalf of the board, I would like to thank Dr Mike Dexter for his leadership and service as Chairman over the past 3½ years. We are pleased that Mike will continue to serve on the board as Senior Independent Non-Executive Director.

Finally, the Board would like to thank the Company's employees for their continued commitment in building the success of SCS, as well as, thank you, our shareholders, for your continued support of this exciting company. It is the Board's focus to build increased shareholder value, while developing a highly competitive organisation, serving customers world wide through the successful application of our products, technologies and services in stem cell biology.

David A Dodd
Chairman

6 February 2007

Operating and Financial Review

Stem Cell Sciences was pleased to celebrate numerous significant milestones in 2006 including several new collaborative research and licensing agreements, additional technology in-licensing and the openings of our new US office and our automated cell production facility in Cambridge, UK.

Our agreements with organisations such as NeuroDiscovery Ltd, the Regenerative Medicine Institute ("REMEDI") at the National University of Ireland, Galway, Millipore Inc., the University of Nice, Sophia Antipolis, the Centre National de la Recherche Scientifique ("CNRS") and additional new technologies in-licensed from the University of Edinburgh, provide a mixture of revenue generating licenses, new product opportunities and technology development programmes for SCS.

Importantly, our achievements in 2006 are consistent with the Company's business plan and efforts to further expand Stem Cell Sciences' position as a leader in the stem cell field. A delay in anticipated revenue flow, in part due to the delay in commissioning our automated production facility and the late closure of a recent pharmaceutical company out-licensing deal have limited SCS total revenues (including other operating income) to a marginal increase over our 2005 figures.

Financial Review

The Company reports turnover of £0.7m (2005: £0.8m) for the year ended 31 December 2006, comprising £0.5m project deliverables and royalties and £0.2m product sales. The delay in anticipated revenue flow has resulted in a slight decrease over our 2005 figures. However, we were pleased to report an increase in royalties received and an associated broadening of our revenue base from our core business units, SC Proven and SC Services.

Other operating income of £0.4m (2005: £0.2m) represents grant income from the UK and European research consortia. Expansion to Research and Development activities led to an increase in operating costs of 12% to £3.7m. Capital expenditure for the year of £0.6m represented the considerable investment made in the Cambridge automated cell-production facility.

Net cash outflow from operations was £2.4m and, after allowing for cash inflows from investment returns and taxation received, the cash outflow before new financing was £2.8m. The overall decrease in cash in the year was £2.8m; net funds at the end of the year were £2.5m. Cash balances held are invested in interest bearing accounts. The current cash resources are forecast by the directors to be sufficient to enable the Group to continue to trade until August 2007.

In October 2006, SCS announced it was considering a dual listing on the Australian Stock Exchange to raise up to AUS$10m which will be used to fund and accelerate current business development and research activities. As the shares were trading at below nominal value in order to facilitate the fundraising the Company undertook a capital reorganisation which was approved by shareholders at the EGM held on 1 November 2006. Each of the issued and unissued Ordinary Shares of £0.50 each in the capital of the Company were subdivided into one Ordinary Share of £0.01 and one Deferred Share of £0.49. On 9 November 2006 the Company issued one Ordinary Share for £0.46 and used part of the proceeds received from that issue to buy back all of the Deferred Shares that were in issue. Following the buyback of the Deferred Shares by the Company all of the Deferred Shares were cancelled.

The proposed flotation, which has received the approval of shareholders of the Company in a general meeting, is at an advanced stage and has been publicly announced. Costs of £230,000 are held in prepayments in relation to work carried out by professional advisers in relation to the flotation to the extent that these are costs which will be treated as issue costs in relation to the new shares to be issued on the proposed flotation. While there can be no certainty either that the proposed flotation will be successful or that it will raise the required funds, the Directors are of the opinion that, taking into account existing facilities available to the Company and the expected proceeds from the Australian flotation, the funds available to the Group will be sufficient for trading requirements for at least twelve months from the date of these financial statements. The Company is progressing with the Listing and a further update will be provided in due course.

Share Based Payments

During the year the Company has implemented FRS20 Share Based payments, which increased administrative expenses by £130,000. This represents a notional charge in respect of employee and director share options. The notional charge has not impacted on the reported net assets, since the charge in the profit and loss account is balanced by a credit to the reserves. Group cash flow is also unaffected.

Performance of SC Business Units

SC Proven®: supply of growth media and reagents

SC Proven® is responsible for the development and commercialisation of stem cell culture media, cell lines and other reagents required to grow, differentiate and apply stem cells to a variety of research applications. SC Proven® is a registered trademark of the Company and products released under this trademark generate trade mark fees, upfront licensing and renewal fees, milestone payments and royalty income for SCS.

In 2005 the Company's SC Proven® business unit established a manufacturing and distribution channel with Chemicon Inc., now part of Millipore Corporation, for its serum free stem cell culture media products. The first SC Proven® product for growth of mouse embryonic stem cells, ESGRO Complete™, was launched in February 2006 and has been well received and broadly adopted by those organisations trialling the product.

A further agreement for HEScGRO™, a serum free cell culture media to enable improved growth of human embryonic stem cells, was announced with Chemicon in October 2006 and commercial sales commenced in January 2007. SCS believes that this product is the first commercially available animal component-free medium in the industry that offers improved methods for growing human embryonic stem cells without the need for animal serum.

The current world market for cell culture media and reagents has been estimated at US$950m, rising to US$1.8bn by 2010. Stem cell media products represent a small component of this market although this is expected to grow as research in this relatively new area of science expands through increasing government research investment.

The Company is continuing to develop new cell culture media products suitable for use with its mouse and human NS cells, and is also refining and developing media for the production and differentiation of human multi-potent adipocyte-derived stem ("hMADS") cells into fat, bone and muscle cells. SCS will continue to source new discoveries to improve and expand on its SC Proven® range.

SC Licensing: providing access to proprietary stem cell technologies

This SC business unit sub-licenses the Company's proprietary portfolio of stem cell technologies to the biotechnology and pharmaceutical industries.

Over the course of the year SCS continued to develop and strengthen its existing licensing arrangements, signing two pharmaceutical licencing deals, as well as seeking additional avenues for out licensing its technology. To develop market penetration in the USA, SCS established a U.S. subsidiary in San Francisco, California, and expanded its global business team with the addition of a Group Business Development Manager.

The Company completed two pharmaceutical licensing deals in 2006 including its first out-licensing evaluation programme for NS cells and a non-exclusive licensing agreement. Both licenses provide SCS with up-front fees, the latter also providing milestone payments and SCS technology licensing options to improvements in SCS technology.

In July 2006, the Company in-licensed a novel human stem cell, hMADS cell, from the University of Nice, Sophia Antipolis and the Centre National de la Recherche Scientifique ("CNRS"). The cells are capable of producing fat and bone at very high efficiency, and will be suited for drug discovery in such areas as obesity and osteoporosis. SCS holds world-wide exclusive rights to commercialise these cells for drug discovery in the field of obesity and an exclusive option in the field of osteoporosis. SCS is currently progressing negotiations to out-license the hMADS technology.

SC Services: custom engineering and supply of cells for research and drug discovery

In December 2006 SCS opened a new automated cell production facility at the Babraham Research Campus in Cambridge, UK, enabling the Company to grow and supply its novel stem cell based drug screens and assays for the pharmaceutical industry using state of the art robotic cell culture equipment. The new facility is equipped with robotic devices for automated, parallel production of multiple cell lines and the Company will continue to expand services for contract engineering and cell supply of Embryonic Stem ("ES") cells, hMADS and NS cells.

This significant investment by SCS is central to the Company's near term revenue flow and longer-term business strategy. So called high throughput screening is applicable to both drug discovery and discovery of regulatory molecules for enhancing the production of stem cells in the laboratory; indeed one of SCS' most promising media products is based on a combination of three molecules first identified as drug candidates. By up-scaling cell based screening capability for the drug discovery industry, SCS also enhances its ability to identify the regulatory molecules which underpin the Company's core competency - stem cell regulation.

In July 2006, the Company announced a collaborative agreement with NeuroDiscovery Limited through its UK-based subsidiary, NeuroSolutions Limited. The collaboration aims to provide high-value contract services to biopharmaceutical companies and to supply them with native human neurones, validated for known ion channels and receptors that are tuned to their drug discovery needs. The initial focus of the collaboration will be on targets that are relevant to the future treatment of major neurological diseases.

A recent report stated that about half of all pharmaceutical company screening groups in lead discovery recently expressed an interest in obtaining primary, stem and progenitor cells for cell-based screening. Under the NeuroSolutions collaboration, the stem cell derivation, cell growth and differentiation skills of SCS will be combined with NeuroDiscovery's specialised electrophysiology techniques. The companies will combine their automated cell production and high-throughput patch-clamping equipment to produce functionally validated cells suited for industry's current drug discovery needs.

SC Therapies: stem cell-based therapeutics

The use of stem cells to repair diseased or damaged tissue (termed "Regenerative Medicine") is expected to lead to significant new therapeutic opportunities in medicine in the next decade or so. It is thought that many intractable diseases may be curable using this technology. SC Therapies is focused on the development of cell therapies for central nervous system ("CNS") diseases. Stem cells of the CNS represent a core scientific competency of the Company and its collaborating international network.

Initial research is being directed to developing and characterising cell lines of potential therapeutic value in the treatment of Parkinson's disease, age related macular degeneration (eye disease), epilepsy and Duchenne's Muscular Dystrophy ("DMD"), the latter through its Japanese affiliate, SCS KK.

In November 2006 the Company signed a collaborative agreement with the Regenerative Medicine Institute ("REMEDI") at the National University of Ireland, Galway. SCS' NS cells have commenced preclinical testing for spinal cord injury at the Institute. The initial study will examine the ability of the NS cells to provide functional improvements in models of spinal cord injury. Results from the initial study are expected in the first quarter of 2007. If this study proves successful, SCS and REMEDI plan to expand the collaboration with more extensive testing.

Intellectual Property

Stem Cell Sciences has secured exclusive rights to a high quality intellectual ("IP") portfolio for efficient production, genetic engineering and the selection of stem cells for use in drug discovery.

In January 2006 the Company signed a technology transfer agreement with the University of Edinburgh, which provides the basis for continued formal collaboration in the area of stem cell research. SCS continues to enhance its IP portfolio through in-licensing and internal development.

As mentioned above, the Company secured exclusive rights to hMADS cell for use in drug discovery in the field of obesity and an exclusive option in the field of osteoporosis. This patent pending technology is expected to have immediate and significant benefits when used for drug discovery.

Major Government and Not-for-profit Initiatives

Stem Cell Sciences recognises the importance of collaborating with government and not-for-profit funded initiatives in the stem cell field. The Company has established itself on a global basis with operations in Europe, Asia and Australia participating in collaborative research programmes of this nature. A principle objective of the Company's foundation and on-going operations is to try to return benefit to those that invest, including regional governments seeking to build wealth on local innovation.

In August 2006 the Company announced its participation in the European Commission approved 'ESTOOLS' programme, a world leading €12 million stem cell research programme involving both academic and commercial researchers. Stem Cell Sciences is one of three commercial partners taking part in this Framework Programme ("FP") VI initiative which is being led by the University of Sheffield. Stem Cell Sciences brings its technologies and expertise to the project and plans to use any discoveries to supply improved cell based drug screening and toxicology options to the pharmaceutical and biotechnology industries. In the longer term, all these technologies will mesh together to help the Company deliver new stem cell therapies.

Strategy

The Company's strategy is to expand the product pipeline and accelerate the technology development needed to provide high quality cells for therapeutic use, by working in partnership with academia, industry and governments. SCS develops and protects the core technology needed for cell supply in stem cell-based academic and pharmaceutical research.

The Company intends to continue commercialising its immediate research product opportunities from its SC Proven® business unit (cell culture media and supportive reagents) via manufacturing, marketing and distribution agreements with major research product providers such as Millipore. SCS retains all rights to SCS products and technologies for therapeutic applications.

SCS is developing further business opportunities in stem cell-based industrial research via technology licensing, custom engineering and production of cells, and the provision of collaborative research support for biotechnology and pharmaceutical company partners under its SC Licensing and SC Services business units.

SCS is also leveraging its technology platform to secure supportive intellectual property via cross-licensing of its technology with the biotechnology and pharmaceutical companies.

Current trading and outlook

The Company made significant progress in pursuing its strategy, particularly strengthening the infrastructure and business development. Importantly, with these solid foundations, and the successful in-licensing of several new products, SCS expects to see revenue growth in the coming year.

The Board continues to be optimistic on the opportunities available to SCS and looks forward to an exciting 2007.

Peter Mountford
President and CEO