RNS Number : 1670C<fipBR>

Stem Cell Sciences plc<fipBR>

28 August 2008<fipBR>

<fipBR> <fipP></fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP>Press Release</fipP> <fipP>Stem Cell Sciences plc announces half-yearly results <fipBR> for the six months ended 30 June 2008</fipP> <fipP><fipBR> </fipP> <fipP>Cambridge, UK, 28th August 2008*Stem Cell Sciences (AIM: STEM, ASX: STC),<fipWRAP> a company focused on the commercialisation of stem cells and stem cell<fipWRAP> technologies, announces its half-yearly report for the six months ended 30th<fipWRAP> June 2008.</fipP> <fipP><fipBR> </fipP> <fipP>Corporate Highlights</fipP>

<fipLI>* Business reorganised and refocused in order to increase volume and quality of<fipWRAP> revenue, and to improve operational efficiencies and reduce costs<fipBR> <fipLIend> <fipLI>*

<fipLI>* <fipP>New business plan & commercial strategy adopted - three key commercial<fipWRAP> objectives:</fipP> <fipLIend> <fipLI>*

<fipLI>* To secure at least one major pharmaceutical research collaboration<fipWRAP> this year<fipLIend> <fipLI>* To pursue the value existing in our extensive and fundamental intellectual<fipWRAP> property in the stem cell field through licensing agreements<fipBR> <fipLIend> <fipLI>* To realise the strategic value of our specialist stem cell media business by an<fipWRAP> asset sale<fipBR> <fipLIend>

<fipLIend> <fipLI>* <fipP>Management and organisational restructuring completed in February<fipWRAP> </fipP> <fipLIend> <fipLI>* <fipP>Focus of research moved to new laboratories in Cambridge as Edinburgh<fipWRAP> facility closed in May</fipP> <fipLIend> <fipLI>* <fipP>Expected cost savings (including restructuring costs) of more than £1m<fipWRAP> over two years</fipP> <fipLIend>

<fipLIend> <fipLI>* <fipP>Collaboration with The Myelin Repair Foundation, USA, for the development<fipWRAP> of techniques that will lead to scalable and sustainable sources of uniform<fipWRAP> human brain cells for research, CNS drug target validation and drug discovery<fipWRAP> assays.</fipP> <fipLIend> <fipLI>* <fipP>Core intellectual property portfolio enhanced with three new patents<fipWRAP> granted:</fipP> <fipLIend> <fipLI>*

<fipLI>* <fipP>Two new patents granted by the US patent Office and the European Patent<fipWRAP> Office (EPO) in May and June, respectively, provide additional protection for<fipWRAP> serum-free cell culture media that improves the stable growth and derivation of<fipWRAP> embryonic stem cells (mouse and human), which leads to an increased purity of<fipWRAP> the cells.</fipP> <fipLIend> <fipLI>* <fipP>A patent for mouse 'Nanog' was granted in June by the EPO complementing<fipWRAP> the Company's existing patent for human Nanog. Nanog is a key factor used to<fipWRAP> convert adult cells back into a pluripotent state. With this technology, adult<fipWRAP> cells can be reprogrammed to behave like embryonic stem cells.</fipP> <fipLIend>

<fipLIend> <fipLI>* <fipP>New media product launch in May of Culticell-iSTEM, a novel, serum-free,<fipWRAP> feeder-free embryonic stem (ES) cell research media product, that maintains<fipWRAP> cells in a pluripotent state. </fipP> <fipLIend> <fipLI>* <fipP>In-license of GFP (green fluorescent protein) technology in June, which<fipWRAP> will be incorporated into research reagents as well as certain stem cell<fipWRAP> technologies used in services assays for high-throughput drug screening and<fipWRAP> toxicity testing. This product enhancement will enable the more-efficient<fipWRAP> selection of specific stem cell populations and to follow cellular responses<fipWRAP> seen as a result of external influences (e.g. toxicity).</fipP> <fipLIend>

<fipP><fipBR> </fipP> <fipP>Financial Highlights</fipP>

<fipLI>* <fipP>Commercial Revenue £275k, AU$594k (2007: £460k, AU$993k)</fipP> <fipLIend> <fipLI>* <fipP>Research Consortia income £212k, AU$458k (2007: £159k, AU$343k)</fipP> <fipLIend> <fipLI>* <fipP>Loss before tax £1.832m, AU$3.96m (2007: £1.718m, AU$3.71m)</fipP> <fipLIend> <fipLI>* <fipP>Loss per share 6.0p (2007: 5.7p)</fipP> <fipLIend> <fipLI>* Cash balance 30 June 2008 £1.7m, AU$3.5m (2007: £5.3m, AU$10.8m) is after<fipWRAP> allowing for expenditure of £1.012m/AU$2.18m on R&D activities.<fipBR> <fipLIend>

<fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP>Alastair Riddell, CEO of Stem Cell Sciences, said:</fipP> <fipP>"The first half of 2008 has been a time of great change within the<fipWRAP> company. A comprehensive restructuring of the organisation and operational base<fipWRAP> of the company necessitated extra costs in the second quarter and impacted<fipWRAP> ongoing business activities. This has now been resolved and we are seeing<fipWRAP> significant growth in our media sales, research collaboration revenue from<fipWRAP> pharmaceutical companies and research consortia grant income. Despite the<fipWRAP> reported fall in revenue in H1 2008 compared to H1 2007, which was related to a<fipWRAP> one-off licensing deal signed in 2006, this is a significant growth compared to<fipWRAP> H2 2007 and we are confident in growth continuing for H2 2008 to give a much<fipWRAP> improved full year compared to 2007."</fipP> <fipP>There will be a conference call to discuss these results on 28th August,<fipWRAP> 2008 at 11.00am BST.</fipP> <fipP><fipBR> </fipP> <fipP>Dial-In Numbers</fipP> <fipP><fipBR> </fipP> <fipP>UK - Toll Free</fipP> <fipP>0808 109 0700</fipP> <fipP>International</fipP> <fipP>+44 203 003 2666</fipP> <fipP>Conference Call Title: Stem Cell Sciences</fipP> <fipP><fipBR> </fipP> <fipP>7-Day Replay </fipP> <fipP>UK / International: +44 (0) 20 8196 1998</fipP> <fipP>Passcode: 2436807</fipP> <fipP>A sound file of the call will also be available at<fipWRAP> www.stemcellsciences.com </fipP> <fipP><fipBR> </fipP> <fipP>For further information, please contact:</fipP> <fipP><fipBR> </fipP> <fipP>Stem Cell Sciences plc (United Kingdom)<fipBR> Alastair Riddell, CEO</fipP> <fipP>Giorgio Reggiani, Finance Director<fipBR> +44 (0)1223 499160</fipP> <fipP><fipBR> </fipP> <fipP>Citigate Dewe Rogerson (United Kingdom)<fipBR> Emma Palmer / Mark Swallow<fipBR> +44 (0) 20 7638 9571</fipP> <fipP><fipBR> </fipP> <fipP>Talk Biotech (Australia)<fipBR> Fay Weston</fipP> <fipP>+61 (0)422 206 036</fipP> <fipP><fipBR> </fipP> <fipP>About Stem Cell Sciences plc</fipP> <fipP><fipBR> </fipP> <fipP>Stem Cell Sciences (SCS) is an international research and development<fipWRAP> company focusing on the commercial application of stem cell biology technologies<fipWRAP> for drug discovery and regenerative medicine research. Stem Cell Sciences is now<fipWRAP> focussing on building revenues through the sale of products, collaborative<fipWRAP> research and licensing deals with international biotechnology and pharmaceutical<fipWRAP> companies.</fipP> <fipP><fipBR> </fipP> <fipP>Stem Cell Sciences has a substantial portfolio of patents and patent<fipWRAP> applications in both adult and embryonic stem cell fields. The Company has been<fipWRAP> active in the stem cell research field since 1994, principally focused on<fipWRAP> technologies to grow, differentiate, and purify adult and embryonic stem cells.<fipWRAP> These include technologies to permit the generation of highly purified stem<fipWRAP> cells and their differentiated progeny (specialised tissue cell types) for use<fipWRAP> in genetic, pharmacological and toxicological screens. Moreover, these<fipWRAP> technologies may be able to provide pure populations of appropriate cell types<fipWRAP> for transplantation therapies in the future.</fipP> <fipP><fipBR> </fipP> <fipP>The Company has its main research base and headquarters in Cambridge, UK<fipWRAP> with a second research base in Monash near Melbourne, Australia and a business<fipWRAP> development office in San Francisco, USA.</fipP> <fipP><fipBR> </fipP> <fipP>-ends- Chief Executive's Statement</fipP> <fipP><fipBR> </fipP> <fipP>A key activity that was completed in the first half of 2008 was the<fipWRAP> implementation of a comprehensive restructuring programme for Stem Cell<fipWRAP> Sciences. This restructuring was designed to improve the Company's financial,<fipWRAP> operational and growth performance, as well as to provide a greater focus on its<fipWRAP> commercialisation efforts in the application of stem cell technologies. These<fipWRAP> initiatives were the result of a strategic review that I, in conjunction with<fipWRAP> the Board, commenced in 2007. The key elements of the new business plan adopted<fipWRAP> by the Board in February 2008 were:</fipP> <fipP><fipBR> </fipP>

<fipLI>* <fipP>Drive revenue growth by accelerating commercialisation activities and<fipWRAP> leveraging the Company's intellectual property position - as I outlined in our<fipWRAP> Preliminary results in February, the new commercial and research plans for the<fipWRAP> Company have three key objectives (detailed below)</fipP> <fipLIend> <fipLI>* <fipP>Consolidate commercial operations and all senior management into existing<fipWRAP> and expanded facilities in Cambridge, UK</fipP> <fipLIend> <fipLI>* <fipP>Closing of facilities in Edinburgh, UK </fipP> <fipLIend> <fipLI>* <fipP>Streamlining of operations in Melbourne, Australia to become a centre for<fipWRAP> research excellence</fipP> <fipLIend>

<fipP><fipBR> </fipP> <fipP>Driving Revenue Growth</fipP> <fipP><fipBR> </fipP> <fipP>With historical leadership in stem cell technology, SCS is in a prime<fipWRAP> position to take advantage of the growing need by the pharmaceutical industry<fipWRAP> for an automated, scalable supply of high quality cell lines for drug research.<fipWRAP> SCS intends to increase its business development efforts in this potentially<fipWRAP> lucrative market opportunity and our first commercial objective is to secure at<fipWRAP> least one major pharmaceutical research collaboration this year. This is likely<fipWRAP> to be in assisting the partner in its search for small molecules that may play a<fipWRAP> role in assisting cell regeneration and in developing cell based therapies for<fipWRAP> the future. I can now report that we are in substantive discussions with several<fipWRAP> major pharmaceutical companies for such collaborations. </fipP> <fipP><fipBR> </fipP> <fipP>Our second commercial objective is to initiate a programme to realise<fipWRAP> full commercial value of our extensive and fundamental intellectual property in<fipWRAP> the stem cell field through the signing of a series of non-exclusive licences.<fipWRAP> Furthermore, we have evidence identifying more than 20 companies and<fipWRAP> institutions believed to be using our technology without the freedom to operate<fipWRAP> under a licence. As such, we are now aggressively seeking licences from a number<fipWRAP> of companies. </fipP> <fipP><fipBR> </fipP> <fipP>Our third major commercial objective is to realise the strategic value of<fipWRAP> our specialist stem cell media business by an asset sale. This will most<fipWRAP> probably be with a company specialising in the manufacture, distribution and<fipWRAP> sales of such material. Again I can report that we are in serious discussion<fipWRAP> with several major companies. Negotiating with large companies for significant<fipWRAP> deals takes many months but we expect to be able to make a positive announcement<fipWRAP> on at least one of these objectives this year.</fipP> <fipP><fipBR> </fipP> <fipP>Streamlining of Operations </fipP> <fipP><fipBR> </fipP> <fipP>As part of the restructuring process undertaken during the first half of<fipWRAP> the year, we have established a new headquarters and UK research base in<fipWRAP> purpose-built facilities at Babraham Research Campus near Cambridge, UK. The<fipWRAP> Cambridge site is already home to SCS' pharmaceutical services division, which<fipWRAP> we believe will be a key driver of future growth for the company.</fipP> <fipP><fipBR> </fipP> <fipP>We have also closed our Edinburgh facility and our operation near<fipWRAP> Melbourne, Australia, will now fully concentrate on advancing pioneering stem<fipWRAP> cell research, such as the advances being made with rat embryonic stem (ES)<fipWRAP> cells.</fipP> <fipP><fipBR> </fipP> <fipP>Managerial Changes</fipP> <fipP><fipBR> </fipP> <fipP>As well as consolidating our operations into fewer sites, we have also<fipWRAP> restructured the senior management to create a simplified team focused on<fipWRAP> commercial delivery. Unfortunately this has meant that several members of the<fipWRAP> previous management team have been made redundant. These include Executive<fipWRAP> Directors Dr Peter Mountford, Chief Technology Officer (Australia) and Hugh<fipWRAP> Ilyine, Vice President and Chief Operations Officer (Edinburgh). Dr Mountford<fipWRAP> will remain with the Company as a Non-Executive Director and consultant<fipWRAP> specifically to evaluate new strategic growth opportunities.</fipP> <fipP><fipBR> </fipP> <fipP>In addition, the Finance Director and Company Secretary, Sue Furber,<fipWRAP> elected not to relocate from Edinburgh to Cambridge and has been replaced by Mr<fipWRAP> Giorgio Reggiani. Mr Reggiani is a Chartered Management Accountant with<fipWRAP> extensive senior financial managerial experience.</fipP> <fipP><fipBR> </fipP> <fipP>The restructuring incurred extra costs of £400k during the period and<fipWRAP> impacted ongoing business operations but these are now resolved and the Company<fipWRAP> is functioning much more effectively. Over the next two years, we expect this<fipWRAP> activity to reduce costs by approximately £1m.</fipP> <fipP><fipBR> </fipP> <fipP>Progress since the Restructuring</fipP> <fipP><fipBR> </fipP> <fipP>The new business plan is now beginning to bear fruit in progress with<fipWRAP> commercial discussions outlined above. Our research plans are also making<fipWRAP> excellent progress and I expect significant newsflow from both areas in the<fipWRAP> second half of the year.</fipP> <fipP><fipBR> </fipP> <fipP>Notable events reported in the first half 2008 include a collaboration<fipWRAP> agreement with The Myelin Repair Foundation of the USA announced in January.<fipWRAP> This collaboration is aimed at developing techniques that will lead to scalable<fipWRAP> and sustainable sources of uniform human brain cells for research, CNS drug<fipWRAP> target validation and drug discovery assays. Specifically, we are working with<fipWRAP> the Case Western University of Cleveland, Ohio in the validation and scale up of<fipWRAP> human nerve cells for therapeutic research for multiple sclerosis. </fipP> <fipP><fipBR> </fipP> <fipP>We also announced the granting of three separate patents in the USA and<fipWRAP> Europe, covering our specialist growth media in May and June. These new patents<fipWRAP> provide additional protection for our serum-free cell culture media and research<fipWRAP> reagents that improve the stable growth and derivation of embryonic stem cells<fipWRAP> (mouse and human), and lead to an increased purity of cells.</fipP> <fipP><fipBR> </fipP> <fipP>Importantly, one of these patents, for mouse 'Nanog', which was granted<fipWRAP> in June by the EPO, complements the Company's existing patent for human Nanog.<fipWRAP> Nanog is a key factor used to convert adult cells back into a pluripotent state.<fipWRAP> With this technology, adult cells can be reprogrammed to behave like embryonic<fipWRAP> stem cells and this process is believed to be crucial to the further use of stem<fipWRAP> cells in drug research and for regenerative medicine by avoiding the controversy<fipWRAP> associated with using embryos.</fipP> <fipP><fipBR> </fipP> <fipP>The Company also launched a new medium, Culticell-iSTEM, in May linked to<fipWRAP> one of the above patents and a publication1 in Nature by a research team at<fipWRAP> Cambridge University led by Professor Austin Smith, the head of our Scientific<fipWRAP> Advisory Board. Culticell-iSTEM is a novel, serum-free, feeder-free ES cell<fipWRAP> research media product, which maintains cells in their basal, pluripotent state<fipWRAP> and provides researchers with a purer starting point for investigating the<fipWRAP> biological potential of ES cells.</fipP> <fipP><fipBR> </fipP> <fipP>In June, we in-licensed GFP (green fluorescent protein) technology, which<fipWRAP> will be incorporated into research reagents as well as certain stem cell<fipWRAP> technologies used in services assays for high-throughput drug screening and<fipWRAP> toxicity testing. This planned product enhancement will enable the<fipWRAP> more-efficient selection of specific stem cell populations and to follow<fipWRAP> cellular responses seen as a result of external influences (e.g.<fipWRAP> toxicity).</fipP> <fipP><fipBR> </fipP> <fipP>Our existing collaborations with Merck & Co. for neural stem cells and<fipWRAP> another large pharmaceutical company in the area of diabetes research, announced<fipWRAP> in 2007, are progressing well.</fipP> <fipP><fipBR> </fipP> <fipP>Financial Review</fipP> <fipP><fipBR> </fipP> <fipP>For the six months ended 30 June 2008, the Company received revenues of<fipWRAP> £275k, AU$594k (2007: £460k, AU$993k), which comprised of £95k SC Proven; £122k<fipWRAP> SC Services and £58k SC Licensing. Other operating income of £212k, AU$458k<fipWRAP> (2007: £159k, AU$343k) represented grant income. Loss before tax for the six months was £1.832m, AU$3.956m (2007: £1.75m, AU$3.8m)<fipWRAP> and the loss per share was 6.0p (2007: 5.7p).</fipP> <fipP><fipBR> </fipP> <fipP>The reorganisation announced in February 2008, which included the closure<fipWRAP> of operations in Edinburgh, resulted in £0.4m of reorganisation costs being<fipWRAP> incurred. </fipP> <fipP><fipBR> </fipP> <fipP>Cash balances at 30 June 2008 were £1.7m, AU$3.5m (2007: £5.3m, AU$10.8).<fipWRAP> As detailed in note 1 to the half yearly report, should revenues remain<fipWRAP> consistent with prior periods, these cash resources are forecast to be exhausted<fipWRAP> by December 2008. Consequently the Group's ability to continue as a going<fipWRAP> concern is dependent on the successful attainment of the commercial objectives<fipWRAP> detailed above.</fipP> <fipP><fipBR> </fipP> <fipP>Post-Period Events </fipP> <fipP><fipBR> </fipP> <fipP>The UK Patent Office granted SCS a patent in July covering our new range<fipWRAP> of stem cell culture media, Culticell-iSTEM, for embryonic stem cells and<fipWRAP> further capitalises on our valuable relationship with Prof. Austin Smith. The<fipWRAP> culture media covered by this patent contain a combination of two or three types<fipWRAP> of enzyme inhibitors enable pluripotent (or embryonic) mouse stem cells to be<fipWRAP> grown reliably without feeder cells, growth factors, leukaemia inhibitory factor<fipWRAP> or serum. This gives the Company the exclusive right to market cell culture<fipWRAP> media containing these inhibitor combinations.</fipP> <fipP><fipBR> </fipP> <fipP>Outlook</fipP> <fipP><fipBR> </fipP> <fipP>This strategic restructuring we have undertaken during the first half of<fipWRAP> 2008 has provided a strong basis for a new, more commercially-orientated Stem<fipWRAP> Cell Sciences. We believe we have the people, the products and technological<fipWRAP> understanding to play a key role in the growing stem cell research market. These<fipWRAP> changes provide increased operational efficiency and place us in a better<fipWRAP> position to deliver shareholder value.</fipP> <fipP><fipBR> </fipP> <fipP>Furthermore, the Company expects to announce significant progress in its<fipWRAP> commercial and research activities during the second half of the year linked to<fipWRAP> the publicly stated focus of several major pharmaceutical companies, life<fipWRAP> science companies and research institutions on stem cells and their role in drug<fipWRAP> discovery and regenerative medicine.</fipP> <fipP><fipBR> </fipP> <fipP></fipP> <fipP>Alastair Riddell</fipP> <fipP>Chief Executive Officer</fipP> <fipP><fipBR> </fipP> <fipP>27 August 2008</fipP> <fipP> Consolidated Income Statement </fipP> <fipP>for the six months ended 30 June 2008 </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP>

6 months to 30 June 6 months to 30 June Year to 31 December 2007<fipBR>

2008 2007<fipBR>

Unaudited Unaudited Audited<fipBR>

Restated<fipBR>

Notes £'000 £'000 £'000<fipBR>

Revenue 4 275 460 593<fipBR>

Cost of Sales (63) (45) (108)<fipBR> <fipBR>

Gross Profit 212 415 485<fipBR> <fipBR>

Other operating income 212 159 258<fipBR>

Administrative expenses (1,332) (1,474) (2,980)<fipBR>

Research and development costs (1,012) (669) (1,335)<fipBR> <fipBR>

Loss from operations (1,920) (1,569) (3,572)<fipBR>

Finance income 89 66 230<fipBR>

Finance expenses (1) (4) (4)<fipBR>

Share of results of associates - (211) (294)<fipBR> <fipBR>

Loss before Taxation (1,832) (1,718) (3,640)<fipBR>

<fipBR>

Income Tax Credit 5 - - 133<fipBR> <fipBR>

Loss For The Period (1,832) (1,718) (3,507)<fipBR> <fipBR>

Loss per share<fipBR>

Basic 7 (6.0)p (5.7)p (11.6)p<fipBR>

Diluted 7 (6.0)p (5.7)p (11.6)p<fipBR> <fipBR> <fipP><fipBR> </fipP> <fipP>Revenue and loss before income tax for the current and previous period<fipWRAP> relate wholly to continuing activities.</fipP> <fipP> Consolidated Balance Sheet </fipP> <fipP>as at 30 June 2008 </fipP>

As at 30 June 2008 As at 30 June 2007 As at 31 December<fipBR>

Unaudited Unaudited Restated 2007 Audited<fipBR>

Notes £'000 £'000 £'000<fipBR>

ASSETS<fipBR>

Non-current Assets<fipBR>

Property, plant and equipment 413 568 516<fipBR>

Intangible assets 311 256 290<fipBR>

Investments accounted for - 67 -<fipBR>

using the equity method<fipBR> <fipBR>

Total non-current assets 724 891 806<fipBR> <fipBR>

Current assets<fipBR>

Trade and other receivables 172 244 333<fipBR>

Current tax assets 149 - 133<fipBR>

Cash and cash equivalents 1,725 5,305 3,607<fipBR> <fipBR>

Total current assets 2,046 5,549 4,073<fipBR> <fipBR>

Total assets 2,770 6,440 4,879<fipBR> <fipBR>

LIABILITIES<fipBR>

Non-current assets<fipBR>

Deferred income (53) (100) (77)<fipBR> <fipBR>

Current Liabilities<fipBR>

Trade and other payables (414) (620) (669)<fipBR>

Deferred income (87) (47) (148)<fipBR> <fipBR>

Total current liabilities (501) (667) (817)<fipBR> <fipBR>

Total liabilities (554) (767) (894)<fipBR> <fipBR>

Net assets 2,216 5,673 3,985<fipBR> <fipBR>

EQUITY<fipBR>

Share capital 7 335 335 335<fipBR>

Share premium account 6,536 6,536 6,536<fipBR>

Capital redemption reserve 10,928 10,928 10,928<fipBR>

Foreign exchange reserve (101) (126) (110)<fipBR>

Merger reserve (1,248) (1,248) (1,248)<fipBR>

Retained deficit (14,234) (10,752) (12,456)<fipBR> <fipBR>

Total equity attributable to 2,216 5,673 3,985<fipBR>

equity holders of the Company <fipBR>

<fipBR> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP> Consolidated Statement of Changes in Equity</fipP> <fipP> for the six months ended 30 June 2008 </fipP>

Attributable to equity holders Share capital Share premium Capital redemption Foreign exchange Merger Retained deficit Total equity<fipBR>

of the company £'000 £'000 reserve reserve reserve £'000 £'000<fipBR>

£'000 £'000 £'000<fipBR>

223 2,297 10,928 (119) (1,248) (9,064) 3,017<fipBR>

Balance at 1 January 2007<fipBR>

Exchange differences arising - - - (7) - - (7)<fipBR>

on translation of overseas<fipBR>

operations<fipBR>

Retained loss for the period - - - - - (1,718) (1,718)<fipBR>

Share based payments - - - - - 30 30<fipBR>

Issue of share capital 112 4,239 - - - - 4,351<fipBR>

335 6,536 10,928 (126) (1,248) (10,752) 5,673<fipBR>

Balance at 30 Jun 2007<fipBR>

Exchange differences arising - - - 16 - - 16<fipBR>

on translation of overseas<fipBR>

operations<fipBR>

Retained loss for the period - - - - - (1,789) (1,789)<fipBR>

Share based payments - - - - - 85 85<fipBR>

335 6,536 10,928 (110) (1,248) (12,456) 3,985<fipBR>

Balance at 31 December 2007<fipBR>

Exchange differences arising - - - 9 - - 9<fipBR>

on translation of overseas<fipBR>

operations<fipBR>

Retained loss for the period - - - - - (1,832) (1,832)<fipBR>

Share based payments - - - - - 54 54<fipBR>

335 6,536 10,928 (101) (1,248) (14,234) 2,216<fipBR>

Balance at 30 June 2008<fipBR> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP>Consolidated Cash Flow Statement </fipP> <fipP>for the six months ended 30 June 2008 </fipP> <fipP><fipBR> </fipP>

6 Months to 30 June 6 Months to 30 June Year to 31 December 2007<fipBR>

2008 2007 Audited<fipBR>

Unaudited Unaudited £'000<fipBR>

£'000 £'000<fipBR>

Cash flows from operating<fipBR>

activities<fipBR>

Loss after income tax (1,832) (1,718) (3,507)<fipBR> <fipBR>

Adjustments for:<fipBR>

Depreciation 132 98 178<fipBR>

Amortisation 27 19 39<fipBR>

Capitalised development costs (48) (54) (108)<fipBR>

Deferred income (85) (72) (123)<fipBR>

Finance Income (89) (66) (230)<fipBR>

Finance Expense 1 4 4<fipBR>

Share of loss of equity - 211 294<fipBR>

accounted investee<fipBR>

Effect of changes in foreign (22) - (10)<fipBR>

exchange rates<fipBR>

Equity settled share based 54 30 115<fipBR>

payment transactions<fipBR>

Income tax income - - (133)<fipBR> <fipBR>

Decrease in debtors 161 474 277<fipBR>

Decrease in creditors (255) (487) (430)<fipBR>

(1,956) (1,561) (3,634)<fipBR> <fipBR>

Interest payable (1) (4) (4)<fipBR>

Income taxes received - - 62<fipBR> <fipBR> <fipBR>

Net cash used in operating (1,957) (1,565) (3,576)<fipBR>

activities<fipBR> <fipBR>

Cash Flows from investing<fipBR>

activities<fipBR>

Interest received 89 66 204<fipBR>

Acquisition of Plant & (23) (8) (34)<fipBR>

Equipment<fipBR>

Grant income received - - 194<fipBR> <fipBR>

Net cash from investing 66 58 364<fipBR>

activities <fipBR> <fipBR>

Cash flows from financing<fipBR>

activities<fipBR>

Proceeds from issue of share - 4,351 4,351<fipBR>

capital<fipBR> <fipBR>

Net cash from financing - 4,351 4,351<fipBR>

activities<fipBR> <fipBR>

Net (decrease)/increase in (1,891) 2,844 1,139<fipBR>

cash and cash equivalents<fipBR>

Effect of foreign exchange 9 (2) 5<fipBR>

rate changes<fipBR>

Cash and cash equivalents at 3,607 2,463 2,463<fipBR>

beginning of period<fipBR> <fipBR>

Cash and cash equivalents at 1,725 5,305 3,607<fipBR>

endof period<fipBR> <fipP><fipBR> </fipP> <fipP> Notes to the Half-yearly report</fipP> <fipP><fipBR> </fipP> <fipP>1 Financial information</fipP> <fipP>The financial information set out in this announcement has been prepared<fipWRAP> on the historical cost basis and in accordance with the recognition and<fipWRAP> measurement requirements of International Financial Reporting Standards and the<fipWRAP> interpretations as adopted by the European Union ("adopted IFRS"). </fipP> <fipP><fipBR> </fipP> <fipP>The comparative figures for the financial year ended 31 December 2007 are<fipWRAP> not the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditors<fipWRAP> and delivered to the registrar of companies. The report of the auditors was (i)<fipWRAP> unqualified, (ii) included references to matters to which the auditors drew<fipWRAP> attention by way of emphasis without qualifying their report, and (iii) did not<fipWRAP> contain a statement under section 237(2) or (3) of the Companies Act 1985. In<fipWRAP> the 2007 financial statements the auditors' report contains an emphasis of<fipWRAP> matter paragraph concerning going concern and capitalised development<fipWRAP> expenditure.</fipP> <fipP><fipBR> </fipP> <fipP>This consolidated interim financial report does not include all of the<fipWRAP> information required for a full annual financial</fipP> <fipP>report, and should be read in conjunction with the consolidated annual<fipWRAP> financial report as at and for the year ended 31 December 2007. The consolidated<fipWRAP> annual financial report as at and for the year ended 31 December 2007 is<fipWRAP> available at stemcellsciences.com.</fipP> <fipP><fipBR> </fipP> <fipP>The consolidated interim financial report was approved by the Board of<fipWRAP> Directors on 27 August 2008.</fipP> <fipP>2 Restatement of comparative information</fipP> <fipP>The information relating to June 2007 has been restated to reflect the<fipWRAP> capitalisation and amortisation of development costs adopted in the comparative<fipWRAP> figures for the financial year ended 31 December 2007. This restatement has the<fipWRAP> effect of decreasing loss before tax by £35,000 for the six month period ended<fipWRAP> 30 June 2007. In the balance sheet as at 30 June 2007 intangible assets have<fipWRAP> increased by £256,000 and the retained deficit has decreased by<fipWRAP> £256,000.</fipP> <fipP><fipBR> </fipP> <fipP>Certain items within the segmental analysis have been reclassified to<fipWRAP> enhance understanding of prior period results and to aid comparability with<fipWRAP> current period presentation. This has no impact on the group loss for the period<fipWRAP> or any prior period.</fipP> <fipP><fipBR> </fipP> <fipP>3 Basis of preparation</fipP> <fipP>The Group is involved in the research, development and commercialisation<fipWRAP> of stem cell and stem cell technology. At this stage of its development it has<fipWRAP> limited revenues arising from licensing arrangements, contract research and<fipWRAP> product sales and its costs exceed its revenue. The Group will continue to<fipWRAP> absorb cash until its products are commercialised.</fipP> <fipP>The half-yearly report is prepared on a going concern basis which the<fipWRAP> directors believe to be appropriate for the following reasons.</fipP> <fipP>The directors have prepared detailed cash flow projections for the period<fipWRAP> to 31 December 2009 which demonstrate that the Group's cash resources are<fipWRAP> expected to be sufficient to enable it to continue to trade and meet its<fipWRAP> liabilities as they fall due for at least twelve months from the date of<fipWRAP> approval of the half-yearly report.</fipP> <fipP>The key elements underpinning the cash flow forecasts are:</fipP>

<fipLI>* <fipP>Revenues from corporate transactions which the directors are confident<fipWRAP> will complete within the short term.</fipP> <fipLIend> <fipLI>* <fipP>Income from research collaborations involving both consultancy and cell<fipWRAP> production services. The directors are at an advanced stage of negotiations with<fipWRAP> a number of major pharmaceutical companies in this respect.</fipP> <fipLIend>

<fipP>These revenues are not certain and significantly exceed the amounts<fipWRAP> received in previous years. If the revenue remains consistent with previous<fipWRAP> years the directors forecast that the Group's cash resources will be used by<fipWRAP> December 2008. If the revenue generation is later than anticipated the directors<fipWRAP> would take appropriate steps to reduce the level of cash outflow and to raise<fipWRAP> additional funds through other sources.</fipP> <fipP><fipBR> </fipP> <fipP>The uncertainty in relation to these matters may cast significant doubt<fipWRAP> on the Group's ability to continue as a going concern and doubt over the<fipWRAP> recoverability of capitalised development expenditure. The Group may therefore,<fipWRAP> be unable to continue realising its assets and discharging its liabilities in<fipWRAP> the normal course of business but the half-yearly report does not include any<fipWRAP> adjustments that would result from the going concern basis of preparation being<fipWRAP> inappropriate.</fipP> <fipP><fipBR> </fipP> <fipP>4 Segment Information</fipP>

Six months ended 30 June 2008 External Revenue Segment Result<fipBR>

£'000 £'000<fipBR>

SC Proven 75 (92)<fipBR>

SC Services 121 (2)<fipBR>

SC Licensing 79 79<fipBR> <fipBR>

Consolidated 275 (15)<fipBR> <fipBR>

Unallocated corporate items (2,477)<fipBR>

Net finance income 88<fipBR>

Taxation -<fipBR> <fipBR>

Loss for Period (1,832)<fipBR> <fipBR>

Six months ended 30 June 2007 External Revenue Segment Result<fipBR>

£'000 £'000<fipBR> <fipBR>

SC Proven 142 5<fipBR>

SC Services 32 (206)<fipBR>

SC Licensing 286 286<fipBR> <fipBR>

Consolidated 460 85<fipBR> <fipBR>

Unallocated corporate items (1,865)<fipBR>

Net finance income 62<fipBR>

Taxation -<fipBR> <fipBR>

Loss for Period (1,718)<fipBR> <fipBR>

Year ended 31 December 2007 Revenue Segment Result<fipBR>

Restated Restated<fipBR>

£'000 £'000<fipBR> <fipBR>

SC Proven 203 (89)<fipBR>

SC Services 75 (508)<fipBR>

SC Licensing 315 302<fipBR> <fipBR>

Consolidated 593 (295)<fipBR> <fipBR>

Unallocated corporate items (3,277)<fipBR>

Net finance income 226<fipBR>

Share of loss of equity accounted investee (294)<fipBR>

Income tax credit 133<fipBR> <fipBR>

Loss for year (3,507)<fipBR> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP>

Six Months Ended 30 Six Months Ended Year Ended <fipBR>

June 2008 30 June 2008 31 Dec 2007<fipBR>

£'000 £'000 £'000<fipBR>

Total Assets Total Assets Total<fipBR>

Assets<fipBR> <fipBR>

SC Proven 371 18 357<fipBR>

SC Services 325 490 325<fipBR>

SC Licensing 191 - -<fipBR> <fipBR>

Unallocated corporate items 1,329 5,676 4,196<fipBR> <fipBR>

Total Assets 2,216 6,184 4,878<fipBR> <fipP><fipBR> </fipP> <fipP>Unallocated corporate items include those certain assets and liabilities<fipWRAP> that are not specifically allocated to business segments as the assets and<fipWRAP> liabilities are utilised, managed and reported centrally across all business<fipWRAP> segments. Consequently it is not possible to provide a meaningful allocation of<fipWRAP> these unallocated corporate items for each business segment as this cannot be<fipWRAP> done on a reasonable basis.</fipP> <fipP><fipBR> </fipP> <fipP>5 Taxation</fipP> <fipP>At 30 June 2008, the Group has significant tax losses that are not<fipWRAP> recognised in the financial information and will be carried forward for<fipWRAP> utilisation against future taxable profits.</fipP> <fipP><fipBR> </fipP> <fipP>6 Fixed Asset Investment</fipP> <fipP>The investment in associate at 30 June 2007 related to an interest in<fipWRAP> Stem Cell Sciences KK, a company incorporated in Japan. The investment was sold<fipWRAP> during October 2007.</fipP> <fipP><fipBR> </fipP> <fipP>7 Loss per share</fipP> <fipP>Basic and diluted loss per share </fipP> <fipP>The calculation of basic loss per share at 30 June 2008 was based on the<fipWRAP> loss attributable to shareholders of £1,832,000 (2007: £1,718,000) and a<fipWRAP> weighted average number of ordinary shares outstanding during the period ended<fipWRAP> 30 June 2008 of 30,351,000 (2007: 30,351,000), calculated as follows:</fipP>

Six Months Ended 30 June 2008 Six Months Ended Year Ended <fipBR>

£'000 30 June 2008 31 Dec 2007<fipBR>

£'000 £'000<fipBR> <fipBR>

Issued ordinary shares at 1 30,351 22,301 22,301<fipBR>

January 2007 <fipBR>

Effect of shares issued in - 8,050 8,050<fipBR>

April 2007<fipBR> <fipBR>

Unallocated corporate items 30,351 30,351 30,351<fipBR> <fipP><fipBR> </fipP> <fipP>The loss attributable to ordinary shares and the number of ordinary<fipWRAP> shares for the purpose of calculating the diluted earnings per share are<fipWRAP> identical to those used for basic earnings per share. The exercise of share<fipWRAP> options would have the effect of reducing the loss per share and consequently is<fipWRAP> not taken into account in the calculation for diluted loss per share.</fipP> <fipP><fipBR> </fipP> <fipP> Independent review report to Stem Cell Sciences plc</fipP> <fipP><fipBR> </fipP> <fipP>Introduction</fipP> <fipP>We have been engaged by the company to review the condensed set of<fipWRAP> financial statements in the half-yearly report for the six months ended 30 June<fipWRAP> 2008 which comprises the Consolidated Income Statement, the Consolidated Balance<fipWRAP> Sheet, the Consolidated Statement of Changes in Equity and the Consolidated Cash<fipWRAP> Flow Statement and the related explanatory notes. We have read the other<fipWRAP> information contained the half-yearly report and considered whether it contains<fipWRAP> any apparent misstatements or material inconsistencies with the information in<fipWRAP> the condensed set of financial statements.</fipP> <fipP><fipBR> </fipP> <fipP>The report is made solely to the company in accordance with the terms of<fipWRAP> engagement. Our review has been undertaken so that we might state to the company<fipWRAP> those matters we are required to state to it in this report and for no other<fipWRAP> purpose. To the fullest extent permitted by law, we do not accept or assume<fipWRAP> responsibility to anyone other than the company for our review work, for this<fipWRAP> report, or for the conclusions we have reached.</fipP> <fipP><fipBR> </fipP> <fipP>Director's responsibilities</fipP> <fipP>The half-yearly report is the responsibility of, and has been approved<fipWRAP> by, the directors. The directors are responsible for preparing the half-yearly<fipWRAP> report in accordance with the AIM Rules.</fipP> <fipP><fipBR> </fipP> <fipP>As disclosed in note 1, the annual financial statements of the group are<fipWRAP> prepared in accordance with IFRSs as adopted by the EU. The condensed set of<fipWRAP> financial statements included in this half-yearly report has been prepared in<fipWRAP> accordance with the recognition and measurement requirements of IFRSs as adopted<fipWRAP> by the EU.</fipP> <fipP><fipBR> </fipP> <fipP>Our responsibility</fipP> <fipP>Our responsibility is to express to the company a conclusion on the<fipWRAP> condensed set of financial statements in the half-yearly report based on our<fipWRAP> review.</fipP> <fipP><fipBR> </fipP> <fipP>Scope of review</fipP> <fipP>We conducted our review in accordance with International Standard on<fipWRAP> Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information<fipWRAP> Performed by the Independent Auditor of the Entity issued by the Auditing<fipWRAP> Practices Board for use in the UK. A review of interim financial information<fipWRAP> consists of making enquiries, primarily of persons responsible for financial and<fipWRAP> accounting matters, and applying analytical and other review procedures. A<fipWRAP> review is substantially less in scope than an audit conducted in accordance with<fipWRAP> International Standards on Auditing (UK and Ireland) and consequently does not<fipWRAP> enable us to obtain assurance that we would become aware of all significant<fipWRAP> matters that might be identified in an audit. Accordingly, we do not express an<fipWRAP> audit opinion.</fipP> <fipP><fipBR> </fipP> <fipP>Conclusion</fipP> <fipP>Based on our review, nothing has come to our attention that causes us to<fipWRAP> believe that the condensed set of financial statements in the half-yearly report<fipWRAP> for the six months ended 30 June 2008 is not prepared, in all material respects,<fipWRAP> in accordance with the recognition and measurement requirements of IFRSs as<fipWRAP> adopted by the EU and the AIM Rules.</fipP> <fipP><fipBR> </fipP> <fipP>Emphasis of matter - going concern and capitalised development<fipWRAP> expenditure</fipP> <fipP>In forming our conclusion on the condensed set o financial statements in<fipWRAP> the half-yearly report, which is not qualified, we have considered the adequacy<fipWRAP> of the disclosures made in note 1 to the condensed set of financial statements<fipWRAP> concerning the group's ability to continue as a going concern. The group<fipWRAP> incurred a loss of £1,832,000 during the six months period ended 30 June 2008.<fipWRAP> At that date, the group had a cash balance of £1,725,000. The directors are<fipWRAP> aware that should revenues generated by the group remain consistent with prior<fipWRAP> periods and/or the group is unable to access additional funds as anticipated by<fipWRAP> the latest business plan its cash resources with be exhausted by December 2008.<fipWRAP> These conditions, along with other matters explained in note 1 to the condensed<fipWRAP> set of financial statements, indicated the existence of a material uncertainty<fipWRAP> which may cast significant doubt on the group's ability to continue as a going<fipWRAP> concern and recover capitalised development expenditure. The financial<fipWRAP> statements do not include the adjustments that would result if the group were<fipWRAP> unable to continue as a going concern and recover its assets.</fipP> <fipP><fipBR> </fipP> <fipP>KPMG Audit Plc</fipP> <fipP>Chartered Accountants</fipP> <fipP>Edinburgh</fipP> <fipP>27 August 2008</fipP> <fipP><fipBR> </fipP> <fipP><fipBR> </fipP> <fipP> </fipP> <fipP>SCS plc (UK)</fipP> <fipP>Alastair Riddell, CEO </fipP> <fipP>(alastair.riddell@stemcellsciences.com)</fipP> <fipP>Phone: +44 (0) 1223 499160 </fipP> <fipP>Fax: +44 (0) 1223 499161</fipP> <fipP><fipBR> </fipP> <fipP>SCS LLC (USA)</fipP> <fipP>George Murphy Jr., VP Sales</fipP> <fipP>(george.murphy@stemcellsciences.com)</fipP> <fipP>Phone: +1 (415) 495 7341 </fipP> <fipP>Fax: +1 (415) 495 7345</fipP> <fipP><fipBR> </fipP> <fipP>SCS (Australia) Pty Ltd</fipP> <fipP>David Newton, General Manager </fipP> <fipP>(david.newton@stemcellsciences.com)</fipP> <fipP>Phone: +61 (0) 3 9905 0600 </fipP> <fipP>Fax: +61 (0) 3 9905 0611</fipP> <HR/> --------------------------------------- <fipP></fipP> <fipP></fipP> <fipP>1 Ying, Q-L et al. (2008) Nature 453, 519-523</fipP> <fipBR> This information is provided by RNS<fipBR> The company news service from the London Stock Exchange<fipBR>

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END <fipBR>

<fipBR> IR SELFUWSASEFA