SecProbe.io

Via Facsimile and U.S. Mail Mail Stop 4720                                                                                                    June 7, 2010   Mr. Martin McGlynn President and Chief Executive Officer  StemCells, Inc.  3155 Porter Drive Palo Alto, CA 94304
Re: StemCells, Inc.
 Form 10-K for the Fiscal Year Ended December 31, 2009
Definitive Proxy Statement filed April 13, 2010 File No. 000-19871
 Dear Mr. McGlynn:

We have reviewed your filings and have the following comments.  In our
comments, we ask you to provide us with  information to better understand your
disclosure.  Where a comment requests you to  revise disclosure, the information you
provide should show us what the revised disc losure will look like and identify the annual
or quarterly filing, as appli cable, in which you intend to fi rst include it.  If you do not
believe that revised disclosure  is necessary, explain the reason in your response.  After
reviewing the information provided, we may raise additional comments and/or request
that you amend your filing.    Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure  requirements and to  enhance the overall
disclosure in your filings.  We look forward to working with you in these respects.  We
welcome any questions you may have about our comments or on any other aspect of our review.  Feel free to call us at the telephone numbers listed at the end of this letter.
 Form 10-K for the Fiscal Year Ended December 31, 2009

 Item 1. Business

General

1.  We note your disclosure in the risk factor titled “The manu facture of cell-based
therapeutic products is nove l, regulated, critical to our business and dependent
upon specialized key materials.”  Specif ically, you state that some of your

Mr. Martin McGlynn
StemCells, Inc. June 7, 2010 Page 2
 material requirements are single sourced  and the loss of a source may adversely
affect your business.  Please identify your products and product candidates that
are dependent on sole source providers and id entify the sole sour ce providers.  If
you have agreements with these parties, file the agreements and describe the
material terms.  Alternatively, tell us why you believe you are not substantially dependent on such agreements.
 Marketing, page 12

2. We note that you have distri bution agreement with Mill ipore Corporation for the
marketing and sale of certain cell cult ure products.  If you are substantially
dependent on an agreement with Milli pore for the sale of your products, please
file the agreement and describe the mate rial terms of the agreement.  If you
believe you are not substantially depende nt on an agreement with Millipore,
please provide us with an analysis suppor ting your determination.  Your analysis
should address the percentage of produc t sales that are at tributable to the
agreement.
 Patents, Property Rights and Licenses, page 12.

3. Please clarify which patents you own and which you license from other parties.
Please also disclose when each  patent identified expires.

Licenses with Research Institutions, page 14

4. We note your reference to a license ag reement with Oregon Health & Science
University on page 14.  Additionally, we note the reference to your collaborators
at OHSU Casey Eye Institute on page 40.  Please provide a discussion of the
material terms of your collaboration a nd license agreements with OHSU and
either file the agreements or provide  us with an analysis supporting your
determination that you are not  required to file them.

5. With respect to your license agreement with the University of Edinburgh, please
also disclose the royalty range (single digi ts, twenties, thirties, etc.), the minimum
annual payments and when the agreement expires.

6. Please include a description of your agr eements with Cambridge University and
RIKEN Institute.  Your discussion should include:

• the nature of the agreement;
• products or product candidates dependent on the agreement;
• each party’s rights and obligations;
• payment provisions, including payments made to date, aggregate potential
milestone payments, minimum annual payments, royalty rates or a range
of royalty rates; and term  and termination provisions.

Mr. Martin McGlynn
StemCells, Inc. June 7, 2010 Page 3
  Additionally, please file the agreements or provide an analysis supporting your
determination that you are not substantially dependent on each agreement.
 Licenses with Commercial Entities, page 14

7. With respect to your agreement with NeuroSpheres, please disclose when the patents licensed to you are scheduled to expire and a range of royalty rates
payable under the license agreement.

8. With respect to your agreement with Stem Cell Therapeutics, please disclose aggregate payments to date, aggregate pot ential milestone payments, applicable
royalty range and term and termination provisions.

9. Please describe the terms of your license  of your IRES technology to a “major
international pharmaceutical company.”  Your discussion should identify the licensor, quantify payments made to date and aggregate potential payments, and describe term and termination provisions.  Please also file the agreement or
provide us with an analysis supporti ng your determination that you are not
required to file the agreement.

Management’s Discussion and Analysis of Fi nancial Condition and Results of Operations

Liquidity and Capital Resources, page 49
Indemnification Agreement

10. You have capitalized $750,000 of litigation cost reimbursements to NeuroSystems
as “Other assets-non-cur rent” due to your right of offset against future
maintenance fees, milestones and royaltie s to be owed under the related license
agreements with this commerc ial entity. Your assertion th at this amount is a fair
estimate of your future obligations to Ne uroSystems appears to be premised on
the future commercialization of the associated products and technologies.
However, on page 23, you assert that thes e products and technologies are only in
the early stages of discovery and devel opment, are inherently risky and may not
ever achieve commercialization. Please explain to us this apparent contradiction.
Also, tell us why you believe that deferral of these litigation cost reimbursements
complies with GAAP with reference to the authoritativ e literature upon which you
based your conclusion.
 Contractual Obligations, page 53

11. Please include the wind-down expense liability  in this table, as well as estimated
license fee and mileston e payments under your arrangements with research
institutions and commercial entities.

Mr. Martin McGlynn
StemCells, Inc. June 7, 2010 Page 4
 Statement of Operations, page 59

12. You report gross profit here and in MD&A  which includes revenue from licensing
agreements and grants.  Please tell us why there are no costs associated with these revenues within the caption, gross profit.

Notes to Consolidated Financial Statements

Note 5. Acquisition of SCS, page 70

13. Disclose the nature of the in process research and deve lopment assets and tell us
how you determined the useful  lives of 13 – 19 years.

Note 6. Intangible Assets, page 71

14. It appears from Note 5 that the caption “In process development” in this note
includes in process research and deve lopment, customer relationships and
developed technology.  Explai n why you believe aggregati ng all those assets into
a single asset class is appropriate.

Note 7. Other Assets, page 72

15. Please explain the nature of prepaid r oyalties and the cont ractual arrangements
governing these payments. Refer us to th e authoritative literature in GAAP upon
which you have based your accounting for this activity.

Note 12. Commitments and Contingencies, page 77

16. Please disclose the terms of your arrange ments with research institutions and
commercial entities, particularly  those described on pages 14-15.

Definitive Proxy Statement filed April 13, 2010

Executive Compensation

Compensation Discussion and Analysis, page 12

17. We note your statement that “We have concluded that our employee compensation programs are designed with the appropriate balance of risk and
reward in relation to our company’s overall business strategy and do not
incentivize executives or other employees to take unnecessary or  excessive risks.
As a result, we believe that risks arising from our employee compensation
policies and practices are not reasonably likely to have a material adverse effect
on the company.”  Please provide us with an analysis supporting your
determination that your compensation polic ies and practices do not present risks
that are likely to have a material adverse effect on you or your business.

Mr. Martin McGlynn
StemCells, Inc. June 7, 2010 Page 5
  Compensation of Named Executive Officers

Bonus Compensation, page 13

18. We note your general description of the co rporate goals on page 14.  To the extent
the corporate goals were quantified or more specifically defined, the discussion
should be expanded to provide a simila r level of detail.  For example:
• Were there any specific activities aime d at initiating clinical trials of
HuCNS-SC or any other items c onstituting progress in your CNS
Program;
• Was progress in your Liver Progr am further defined; and
• Were any other corporate deve lopment activities identified?

Additionally, discuss the extent to which each goal was achieved and how the
bonus award of 70% was determined.

Proposal Number 1, Election of Directors, page 25

19. In accordance with newly revised Item 401( e) of Regulation S-K, please provide
disclosure discussing for each director and director nominee, on an individual
basis, the particular experience, qualifications, attributes or skills that led the
company’s board to conclude that the pe rson should serve as a director of the
company.
*    *    *    *
 Please respond to these comments within  10 business days or tell us when you
will provide us with a response.  Please furnish a letter that  keys your responses to our
comments and provide the requested information.  Detailed letters gr eatly facilitate our
review.  Please furnish your letter on EDGAR under the form type label CORRESP.
  We urge all persons who are responsible for the accuracy and adequacy of the
disclosure in the filing to be certain that the filing includes all in formation required under
the Securities Exchange Act of 1934 and th at they have provided all information
investors require for an informed invest ment decision.  Since the company and its
management are in possession of all facts re lating to a company’s disclosure, they are
responsible for the accuracy and adequacy of the disclosures they have made.
  In connection with responding to our co mments, please provide, in your letter, a
statement from the company acknowledging that:
• the company is responsible for the adequacy  and accuracy of the disclosure in the
filing;
• staff comments or changes to disclosure  in response to staff comments do not

Mr. Martin McGlynn
StemCells, Inc. June 7, 2010 Page 6
 foreclose the Commission from taking any action with respect to the filing; and
• the company may not assert staff comme nts as a defense in any proceeding
initiated by the Commission or any person under the federal secu rities laws of the
United States.

In addition, please be advise d that the Division of Enfo rcement has access to all
information you provide to the staff of the Divi sion of Corporation Fi nance in our review
of your filing or in response to our comment on your filing.
Please contact Frank Wyman, Staff Acc ountant, at (202) 551-3660 or Lisa
Vanjoske, Assistant Chief Accountant, at (202) 551-3614, if you have any questions regarding the processing of your response as well as any questions regarding comments
on the financial statements and related ma tters. You may contact Karen Ubell, Staff
Attorney, at (202) 551-3873 or Suzanne Haye s, Legal Branch Chief, at (202) 551-3675
with questions on any of the othe r comments. In this regard, do not hesitate to contact me
at (202) 551-3679.

Sincerely,

Jim B. Rosenberg Senior Assistant Chief Accountant