Sunday, December 9, 2007

A Message from the CEO - Jeff Krstich

Recently it was widely reported by the media that two groups of scientists have succeeded in turning human skin cells into cells that are very similar, though not identical, to embryonic stem cells. The media reports highlight that the method used to create stem cells from skin cells, called de-differentiation, does not involve the destruction of any human embryos.

As expected, the media attention generated numerous inquiries to our company, primarily on how this new research differs from ours, and what effect it might have on the field of stem cell research and our activities in that field.

Although the new discovery is scientifically exciting, it will not alter International Stem Cell’s basic strategy for providing human cells for transplant therapy. The reason is that our scientists, through our proprietary process called “Parthenogenesis”, have already created human stem cell lines that have the same characteristics as embryonic stem cells, and also do not involve the use or destruction of any fertilized human embryos.

Parthenogenesis enables us to produce Parthenogenetic Stem Cells Lines that can deliver an unlimited supply of cells for research or therapy, as needed and on demand. Our “Parthenotes” are already being produced in our laboratories and are available for use today by qualified researchers in any country that honors US and International patent laws. We have also differentiated some of those Parthenotes into specific cell types such as nerve cells and heart cells; some of which are already in production and expected to be used in human trials in 2008.

Unlike the cells derived through the recently announced de-differentiation of skin cells, our Parthenogenetic process does not involve viruses that can transmit disease, nor the use of specific genes that the scientists who published the recent work acknowledge are known to potentially be cancer producing. In addition, ISCO Parthenotes are developed with either no use or minimal use of animal serums or animal by-products, a problem that affects all of the lines currently “approved” by the Federal Government.

For all these reasons, we have chosen not to pursue de-differentiation, but to focus on creation of Parthenogenic Stem Cell Lines and the cells that can be created from them. Although we actually hold license rights to a technology for producing de-differentiated cells, we prefer to focus on Parthenotes, which offer the same freedom from the use or destruction of human embryos, are already available for production in quantity for research (or therapy once appropriate approvals are received), and are not burdened by the risks of introducing viruses or potentially cancer causing genes.

To summarize:

1. De-differentiation is an interesting discovery that may best be utilized for drug testing in a lab setting. Unfortunately, because of its inherent cancer producing potential, coupled with its use of viruses that may transmit disease, it is not currently suitable for human therapeutics.

2. If, however, the inherent flaws in de-differentiation are somehow solved and the process evolves to show greater promise, our company already holds license for a similar process and we could quickly pursue that avenue as well.

3. Our Parthenogenetic Stem Cells already can provide all the things that de-differentiation derived cells promise, and more:

a) Our stem cells do not require fertilized embryos and thus no fertilized embryos are destroyed in the process.

b) Our stem cells do not employ the use of any cancer causing genes.

c) Our stem cells use no viruses that can cause disease.

d) Our stem cells use none or minimal animal serums or animal by-product.

e) Our stem cells hold the promise for human therapeutic use with the distinct advantage of requiring little or no immunosuppressant drugs.

f) We are already producing human stem cells suitable for clinical trials, doing so in quantity and under strict quality control, and expect to be using those cells in two Phase I trials shortly.

In conclusion, although we respect and indeed applaud the scientific achievement of this newly published research, we do not believe it will have significant impact on our scientific pursuits, and certainly not a negative one. On the contrary, we find that every advance in stem cell research buoys the entire field. It generates excitement and optimism. Most importantly, it shines more light on what we believe to be the most promising area of medicine, and brings us ever closer to cure disease and reduce human suffering.

As always, we stand ready to respond to your questions and comments.

Most sincerely,

Jeff Krstich,

Chief Executive Officer.

Forward-Looking Statements

This news release and the "Message from the CEO" on the company's website to which it refers, contain statements pertaining to future research, clinical development and potential opportunities for the company and its subsidiary, along with other statements about the future expectations, beliefs, plans, goals, or prospects expressed by management. Those and any statements that are not historical fact (including, but not limited to statements that contain words such as “will,” “believes,” “plans,” “anticipates,” “expects,” “estimates,”) should be considered forward-looking statements. Forward-looking statements involve risks and uncertainties, including, without limitation, risks inherent in the development and/or commercialization of potential products, uncertainty in the results of clinical trials or regulatory approvals, need and ability to obtain future capital, and maintenance of intellectual property rights. Actual results may differ materially from the results anticipated in these forward-looking statements and as such should be evaluated together with the many uncertainties that affect the company's business, particularly those mentioned in the cautionary statements found in the company's Securities and Exchange Commission filings. The company disclaims any intent or obligation to update these forward-looking statements.

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