International Stem Cell Corporation Issues Letter to Shareholders

Letter Describes Changing Political Climate, Competitive Advantages of Parthenogenesis, Creation of Human Corneal Tissue, New Partnerships, Clinical Trials, and Other Developments

International Stem Cell Corporation (OTCBB: ISCO) (www.internationalstemcell.com), the first company to perfect a method of creating human stem cells from unfertilized eggs, has issued a letter to its shareholders. To view the shareholder letter in its entirety, please follow the link to the company's website:http://www.internationalstemcell.com/shareholderletter.htm.

The Letter covers a variety of subjects, including:

• Competitive advantages of human parthenogenetic stem cells over other kinds of stem cells
• Completion of December 2008 financing; receipt of first $2 million of anticipated private equity of up to $5 million
• First company to grow human corneal tissue in a Petri dish, suitable for toxicity testing and possibly suitable for corneal implants
• Commencement of pre-clinical animal trials using parthenogenetic stem cells to treat retinal disease
• Partnership with Absorption Systems to commercialize human stem cell-derived corneal tissue for drug testing
• Description of collaborative partnership goals toward the creation of an unlimited supply of cells that is not reliant on donor tissue and that does not risk rejection by patient immune systems

"The recent developments detailed in our shareholder letter illustrate that the company remains on track to achieve its goals," commented Kenneth C. Aldrich, Chairman and CEO. "We are excited for our shareholders to read this update, thank them for their continued enthusiasm and support, and look forward to providing updates in what we think will be an exciting 2009."

ABOUT INTERNATIONAL STEM CELL CORPORATION (ISCO.OB)

International Stem Cell Corporation is a California biotechnology company focused on developing therapeutic and research products. ISCO's technology, Parthenogenesis, results in the creation of pluripotent human stem cell lines from unfertilized human eggs. ISCO scientists have created the first Parthenogenetic homozygous stem cell line (phSC-Hhom-4) that can be a source of therapeutic cells that will minimize immune rejection after transplantation into hundreds of millions of individuals of differing sexes, ages and racial groups. These advancements offer the potential to create the first true "Stem Cell Bank" and address ethical issues by eliminating the need to use or destroy fertilized embryos. ISCO also produces and markets specialized cells and growth media worldwide for therapeutic research through its subsidiary Lifeline Cell Technology. For more information, visit the ISCO website at: www.internationalstemcell.com.

To subscribe to receive ongoing corporate communications please click on the following link: http://www.b2i.us/irpass.asp?BzID=1468&to=ea&s=0.

FORWARD-LOOKING STATEMENTS

Statements pertaining to anticipated future financial and/or operating results, future growth in research, technology, clinical development and potential joint venture and other opportunities for the company and its subsidiary, along with other statements about the future expectations, beliefs, goals, plans, or prospects expressed by management constitute forward-looking statements. 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 also be considered to be 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, application of capital resources among competing uses, 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.

International Stem Cell Corporation
Kenneth C. Aldrich, Chairman, CEO
kaldrich@intlstemcell.com
760-940-6383
or
William Adams, Chief Financial Officer
wadams@intlstemcell.com
760-940-6383
or
The Investor Relations Group
212-825-3210
Investor Relations:
Adam S. Holdsworth
aholdsworth@investorrelationsgroup.com
or
Media Relations:
Laura Colontrelle
lcolontrelle@investorrelationsgroup.com

International Stem Cell Corporation Featured In The Economist

Article Details ISCO's Solutions To Ethical And Immune Rejection Issues

International Stem Cell Corporation (OTCBB: ISCO) (www.internationalstemcell.com), the first company to perfect a method of creating human "parthenogenetic" stem cells from unfertilized eggs, has been featured in the January 31, 2009, edition of The Economist, the authoritative weekly publication focusing on international politics and business news and opinion.

The article, titled "Embryonic Stem Cells: Can I Serve You Now?," details how ISCO's unique parthenogenetic approach helps resolve two of the conundrums that have long shadowed stem cell research: ethical issues and immune rejection difficulties. "ISCO has found a way of producing embryonic-like stem cells from unfertilized eggs. The egg is chemically stimulated to create a group of cells that form a non-viable (and unfertilized) 'embryo' . . . something that could not be implanted into a woman's womb and produce a child. Nonetheless, the cells it contains have the same characteristics as stem cells. Besides the ethical advantages this procedure has, it could also have medical ones. Because lines of stem cells created in this way have only one parent, they are immunologically simpler than normal embryonic cells—in other words they have a smaller variety of the proteins that trigger immune rejection."

"We are very pleased to see coverage of this kind in a publication as venerable and prestigious as The Economist," says International Stem Cell Corporation Chairman and CEO Kenneth Aldrich. "For a variety of reasons, it is clear that there is renewed interest in the stem cell research arena, and we are grateful to The Economist for allowing us to communicate our story."

The complete article can be accessed by visiting: http://www.economist.com/science/displayStory.cfm?story_id=13014104&source=hptextfeature

About The Economist

The Economist offers timely reporting, concise commentary and comprehensive analysis of global news in its weekly magazine and online at economist.com. With objective authority, clarity and wit, The Economist presents the world's political, business, scientific, technological and cultural affairs and the connections between them. Edited in London since 1843, The Economist has a worldwide print circulation of more than 1.3 million and three million monthly visitors to www.Economist.com.

ABOUT INTERNATIONAL STEM CELL CORPORATION (ISCO.OB)

International Stem Cell Corporation is a California biotechnology company focused on developing therapeutic and research products. ISCO's technology, Parthenogenesis, results in the creation of pluripotent human stem cell lines from unfertilized human eggs. ISCO scientists have created the first Parthenogenetic homozygous stem cell line (phSC-Hhom-4) that can be a source of therapeutic cells that will minimize immune rejection after transplantation into hundreds of millions of individuals of differing sexes, ages and racial groups. These advancements offer the potential to create the first true "Stem Cell Bank" and address ethical issues by eliminating the need to use or destroy fertilized embryos. ISCO also produces and markets specialized cells and growth media worldwide for therapeutic research through its subsidiary Lifeline Cell Technology. For more information, visit the ISCO website at: www.internationalstemcell.com.

To subscribe to receive ongoing corporate communications please click on the following link: http://www.b2i.us/irpass.asp?BzID=1468&to=ea&s=0.

FORWARD-LOOKING STATEMENTS:

Statements pertaining to anticipated future financial and/or operating results, future growth in research, technology, clinical development and potential joint venture and other opportunities for the company and its subsidiary, along with other statements about the future expectations, beliefs, goals, plans, or prospects expressed by management constitute forward-looking statements. 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 also be considered to be 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, application of capital resources among competing uses, 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.

Key Words: Stem Cells, Biotechnology, Parthenogenesis

International Stem Cell Corporation
Kenneth C. Aldrich, Chairman, CEO
kaldrich@intlstemcell.com
760-940-6383
or
Jeffrey Janus, President
jjanus@intlstemcell.com
760-940-6383
or
The Investor Relations Group
212-825-3210
Investor Relations:
Adam S. Holdsworth
aholdsworth@investorrelationsgroup.com
or
Media Relations:
Laura Colontrelle
lcolontrelle@investorrelationsgroup.com

International Stem Cell Corporation Partners with Absorption Systems to Commercialize Human Stem Cell-Derived Corneal Tissue for Drug Testing

International Stem Cell Corporation (OTCBB:ISCO (www.internationalstemcell.com), the first company to perfect a method of creating human "parthenogenetic" stem cells from unfertilized eggs, has formed a partnership with Absorption Systems to utilize ISCO's parthenogenetic stem cell-derived human corneal tissue to measure drug disposition, drug safety and drug-drug interactions. The collaboration between the companies is focused on using Absorption Systems' know how in creating in vitro assay systems to develop a superior method of testing drugs that will also reduce the use of laboratory animals currently necessary for such tests.

In the past, researchers have grown corneal cells in the laboratory, but ISCO is believed to be the only company to grow a self-assembling corneal construct suitable for toxicity testing in the laboratory and possibly suitable for corneal transplants. ISCO's corneal constructs include cell layers and structures normally found in a human cornea, as confirmed by an independent third-party laboratory. ISCO's proprietary lines of parthenogenetic stem cells remove the need for fertilized embryos and in a therapeutic setting, minimize the threat of immune rejection. This breakthrough was published in the peer-reviewed journal Cloning & Stem Cells (Volume 9, Number 3; September 2007:432-449 and, Volume 10, Number 1; March 2008:11-24).

"The combination of ISCO's skill in culturing human parthenogenetic stem cells and Absorption Systems' proficiency in performing tissue-based assays may provide a powerful and unique drug testing model for the pharmaceutical industry and the field of ophthalmology," commented Jeffrey Janus, president of ISCO. "In addition, this work complements ISCO's effort to use its parthenogenetic stem cells to create cell transplant therapies for diseases of the eye. We plan to further develop our corneal tissue technology with a goal of routinely growing living human corneas for ultimate use in human corneal transplants."

"ISCO's corneal construct, combined with Absorption Systems' expertise in assessing drug disposition, may provide pharmaceutical and ophthalmology researchers with new insight, without the need for animal models," said Patrick M. Dentinger, president and CEO of Absorption Systems. "Absorption Systems' services yield the type of definitive data expected by the FDA, so we believe that our combined products will be of great interest to researchers studying diseases of the eye."

ABOUT INTERNATIONAL STEM CELL CORPORATION (ISCO.OB):

International Stem Cell Corporation is a California biotechnology company focused on developing therapeutic and research products. ISCO's technology, Parthenogenesis, results in the creation of pluripotent human stem cell lines from unfertilized human eggs. ISCO scientists have created the first Parthenogenetic homozygous stem cell line (phSC-Hhom-4) that can be a source of therapeutic cells that will minimize immune rejection after transplantation into hundreds of millions of individuals of differing sexes, ages and racial groups. These advancements offer the potential to create the first true "Stem Cell Bank" and address ethical issues by eliminating the need to use or destroy fertilized embryos. ISCO also produces and markets specialized cells and growth media worldwide for therapeutic research through its subsidiary Lifeline Cell Technology. For more information, visit the ISCO website at: www.internationalstemcell.com.

To subscribe to receive ongoing corporate communications please click on the following link: http://www.b2i.us/irpass.asp?BzID=1468&to=ea&s=0.

ABOUT ABSORPTION SYSTEMS:

Founded in 1996 by Patrick Dentinger and Ismael J. Hidalgo, Ph.D., Absorption Systems, LP focuses on performing assays that can predict the Absorption, Distribution, Metabolism, and Excretion (ADME) of small molecules using a variety of in vitro, in situ, and in vivo biological models. Absorption Systems supports these assays with state-of–the-art bioanalytical capabilities and preclinical formulation services. For more information, visit: www.absorption.com

FORWARD-LOOKING STATEMENTS:

Statements pertaining to future financial and/or operating results, future growth in research, technology, clinical development and potential opportunities for the company and its subsidiary, along with other statements about the future expectations, beliefs, goals, plans, or prospects expressed by management constitute forward-looking statements. 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 also be considered to be 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.

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.