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July 6, 2010

VIA EDGAR

Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, D.C. 20549-7010

    Attention:

    Frank Wyman

Lisa Vanjoske

Karen Ubell

Suzanne Hayes

Jim B. Rosenberg

    Re:

    SEC Comment Letter dated June 7, 2010

StemCells, Inc.

Form 10-K for the fiscal year ended December 31, 2009

Definitive Proxy Statement on Schedule 14A filed April 13, 2010

File No. 001-19871

Ladies and Gentlemen:

On behalf of StemCells, Inc. (the “Company”), this letter is being submitted to the Staff of the
Securities and Exchange Commission (the “Commission”) in response to the comments in the Staff’s
letter dated June 7, 2010 (the “June 7 Letter”) regarding the Company’s 10-K for the year ended
December 31, 2009 (the “2009 10-K”) and definitive proxy statement filed on April 13, 2010 (our
“2010 Proxy Statement”).

For reference purposes, the comments as reflected in the June 7 Letter are reproduced in bold in
this letter, and the corresponding responses of the Company are shown below each comment.

Accordingly, we supplementally advise you as follows:

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 manufacture of cell-based therapeutic
products is novel, regulated, critical to our business and dependent upon specialized key
materials.” Specifically, you state that some of your 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

U.S. Securities and Exchange Commission

July 6, 2010

Page 2

    identify the sole source 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.

Company Response:

While there are over a hundred separate disposables and dozens of media and reagents used in both
the manufacture of a patient dose of HuCNS-SC cells and in the production of cell banks, just a few
of these are single sourced. Some of these are custom made for us under contract, but none of
these are considered material to our business. Also, we do not believe our business is
substantially dependent on any of the single sourced materials because each could be replaced by
alternative technologies or provided by separately engaged manufacturers upon our request. We
believe we have a sufficient supply of all key materials in inventory to prepare the patient doses
needed to complete our currently active clinical trials.

Nevertheless, while we believe our supply chain risks are manageable, replacing technologies in a
highly regulated manufacturing process such as ours could entail additional cost and time and would
have the potential to delay one or more of our planned clinical trials.

Marketing, page 12

    2.

    We note that you have distribution agreement with Millipore Corporation for the marketing and
sale of certain cell culture products. If you are substantially dependent on an agreement
with Millipore for the sale of your products, please file the agreement and describe the
material terms of the agreement. If you believe you are not substantially dependent on an
agreement with Millipore, please provide us with an analysis supporting your determination.
Your analysis should address the percentage of product sales that are attributable to the
agreement.

Company Response:

We discuss our arrangement with Millipore Corporation because we believe it indicates the potential
for our cell culture products and represents one potential pathway to the commercialization of
these technologies. However, we are principally a research and development company and none of our
product development efforts are substantially dependent on any revenues from, or on our
relationship with, Millipore. Our arrangement with Millipore is essentially a licensing one from
which we receive a percentage of Millipore’s net sales of certain identified products, all of which
are manufactured by Millipore. None of these revenues are material to our business, and presently
we view our current revenues as an incremental offset to our principal business expenditures
related to our research, development, and commercialization of stem cell therapeutics and related
enabling technologies.

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.

U.S. Securities and Exchange Commission

July 6, 2010

Page 3

Company Response:

Of the eighteen patents identified on pages 12-13 of our 2009 10-K as being amongst our
“significant” patents, eight are owed by us and ten are exclusively licensed to us. The table
below sets out the anticipated expiration dates of these patents absent the grant of any patent
term extension, whether under the Hatch Waxman Act (Pub. L. 98-417) or otherwise, which information
will be included in our future 10-K filings:

    Patents Owned:

    5,968,829 (2017); 7,153,686 (2019);
6,777,233 (2017); 6,468,794 (2019);
6,238,922 (2019); 7,049,141 (2019);
7,211,404 (2022); 7,381,561
(2024)[note this patent was
incorrectly identified in our 2009
10-K as U.S. Pat. No. 7,381,261]

    Patents Exclusively Licensed

(licensor included):

    7,361,505 (NeuroSpheres, 2017);
6,497,872 (NeuroSpheres, 2019);
5,851,832 (NeuroSpheres, 2015);
6,294,346 (NeuroSpheres, 2018);
7,005,299 (University of Edinburgh,
2014); 6,150,169 (University of
Edinburgh, 2014); 6,878,542
(University of Edinburgh, 2014);
7,256,041 (University of Edinburgh,
2014); 6,146,888 (University of
Edinburgh, 2014); 7,371,573
(University of Edinburgh, 2019)

Licenses with Research Institutions, page 14

    4.

    We note your reference to a license agreement 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 and 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.

Company Response:

We view our relationships with many of our collaborators as indicators of the potential of our
research and development efforts and of our technologies. Our partners in these efforts, such as
Oregon Health & Science University and OHSU Casey Eye Institute, are considered by many as leading
centers of research excellence and therefore helpful in demonstrating to investors the progress and
potential of our programs. We believe this is also true with respect to many of our licensing
relationships, particularly with academic centers of excellence such as Cambridge University and
the RIKEN Institute.

Despite the fact that we view these relationships as helpful information for investors to
understand the breadth and sophistication of our collaboration partners, in most instances we do
not view the contractual aspects of these relationships as material. This is true for Oregon
Health & Science University, OHSU Casey Eye Institute, Cambridge University, and the RIKEN
Institute, for example. In all these cases, the ongoing financial obligations with these parties
are not material. Likewise, the work performed or the licenses granted under these agreements are
not material to our business. We consider our relationships with these entities to be part of our
ordinary course of business given that we are engaged in the development and commercialization of
stem cell therapeutics and enabling technologies for stem cell-based research and drug discovery
and development.

U.S. Securities and Exchange Commission

July 6, 2010

Page 4

    5.

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

Company Response:

In future filings, we will summarize the termination provisions of our license agreement with the
University of Edinburgh, dated as of January 31, 2006 (the “Edinburgh License Agreement”).
Essentially the agreement is terminable by either party upon the other party’s material breach as
well as terminable by the University of Edinburgh in the event of our bankruptcy.

With respect to minimum annual payments owed, we respectfully advise the Staff that we consider the
royalty payments with the University of Edinburgh to be confidential information for the reasons
set forth in the confidential treatment request we filed with the
Commission on March 11, 2010 in respect
of the Edinburgh License Agreement, which was granted effective April 20, 2010. We continue to
believe that disclosing the royalty rate or a range of royalty rates would result in competitive
harm to the Company.

    6.

    Please include a description of your agreements 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.

Additionally, please file the agreements or provide an analysis supporting your
determination that you are not substantially dependent on each agreement.

Company Response:

We refer the Staff to our response to Comment 4. We believe that these agreements are not
material, although we consider identifying the relationships with these entities as helpful
information for investors to understand the breadth and sophistication of our collaboration
partners. Accordingly, we have described the basic subject matter of our agreements with these
parties in our filings.

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.

Company Response:

In future filings, we will identify the significant patents we have licensed from NeuroSpheres and
disclose the expiration dates of these patents. However, we respectfully advise the Staff that we
consider the royalty payments with NeuroSpheres to be confidential

U.S. Securities and Exchange Commission

July 6, 2010

Page 5

information
for the reasons set forth in the confidential treatment request filed
with the Commission in
March 2001 and later granted in respect of the License Agreement, dated as of October 30, 2000,
between the Company and NeuroSpheres Holdings Ltd. We continue to believe that disclosing these
royalty rates, even as a range of royalty rates, would result in competitive harm to the Company.

    8.

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

Company Response:

We respectfully advise the Staff that we do not consider our agreement with Stem Cell Therapeutics
to be material. This is one of several license agreements entered into by us in the ordinary
course of business to grant non-exclusive rights to practice one or more technologies covered by
some of our patents in order to pursue activities that are not central to our business strategy of
developing and commercializing cell-based therapeutics. In this case, the license covers three
patent families and allows Stem Cell Therapeutics to use erythropoietin in combination with a
proliferating agent to modulate or stimulate endogenous neural stem cells for the treatment of
certain CNS diseases and disorders. Total revenue under this license will be contingent upon the
clinical and commercial success of Stem Cell Therapeutics. We do not consider the annual fees or
likely near-term revenues under this license to be material.

    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 supporting your determination
that you are not required to file the agreement.

Company Response:

We respectfully advise the Staff that we do not consider our agreement with this pharmaceutical
company for IRES technology to be material. This is one of several license agreements entered into
by us in the ordinary course of business to grant non-exclusive rights to practice one or more
technologies covered by some of our patents in order to pursue activities that are not central to
our business strategy of developing and commercializing cell-based therapeutics. In this case, the
license covers just one patent family and allows the pharmaceutical company to engage in certain
internal research activities not related to stem cell therapeutics. The license is now fully-paid
up and the total revenues received under this license were immaterial.

Management’s Discussion and Analysis of Financial 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-current” due to your right of offset

U.S. Securities and Exchange Commission

July 6, 2010

Page 6

    against future maintenance fees, milestones and royalties to be owed under the related
license agreements with this commercial entity. Your assertion that this amount is a fair
estimate of your future obligations to NeuroSystems appears to be premised on the future
commercialization of the associated products and technologies. However, on page 23, you
assert that these products and technologies are only in the early stages of discovery and
development, 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 authoritative
literature upon which you based your conclusion.

Company Response:

Pursuant to a previously filed agreement amending our license agreements with NeuroSpheres, we are
entitled to off-set all litigation costs incurred in our patent infringement suit against
Neuralstem (discussed on page 32,“Item 3. Legal proceedings” and page 79, “Contingencies”) against
amounts that would otherwise be owed to NeuroSpheres under these license agreements, such as annual
maintenance fees, milestones and royalty payments. We have capitalized $750,000 of our litigation
costs in this lawsuit because we will use these costs to offset the $50,000 asset-based royalty
payment we are contractually obligated to pay NeuroSpheres each year. The $750,000 capitalized was
not premised on future commercialization of products or technologies but rather on annual payments
to the farthest expiry date of our license agreements with NeuroSpheres.

Because these annual payments of $50,000 are fully creditable against royalties due to
NeuroSpheres, we have classified the $750,000 as part of prepaid royalties under “Other Assets.”
We will clarify this disclosure in future filings. We set forth below what we consider the
applicable accounting guidance in the GAAP Literature:

Concept 6:

Assets

25. Assets are probable future economic benefits obtained or controlled by a particular entity
as a resu