Medistem Inc. Annual Letter to Shareholders

SAN DIEGO, CA--(Marketwire - Jan 4, 2013) - Medistem Inc. ( PINKSHEETS : MEDS ) today issues the following letter to shareholders.

Dear Fellow Shareholders,

2012 was marked by significant progress in the development of the Endometrial Regenerative Cell (ERC), our new universal donor "stem cell drug."Most significantly, we initiated a double blind, placebo controlled clinical study in patients with end stage heart failure, in which ERC were administered via the Medistem's patent-pending minimally invasive procedure.The clinical trial comprises three escalating doses of ERC with cohorts of 20 patients per dose.To date 14 patients have been treated with no adverse effects, thus demonstrating feasibility of the administration procedure, as well as safety of the cells.Because it is a double blind study, efficacy will not be known until the trial is completed.The clinical trial is being conducted at the Backulev Center for Cardiovascular Surgery in Moscow, Russia, by Academician Leo Bockeria.The company also initiated a 15 patient critical limb ischemia trial in China in collaboration with Shanghai Jia Fu Medical Apparatus Inc.To date two patients have been treated.The trial is based on the Medistem critical limb ischemia study that has been cleared by the FDA.

In addition, we licensed from Yale University the world-wide rights for a patent application using ERC to treat Type 1 diabetes.We also initiated a program in type 1 diabetes, with the goal of filing an Investigational New Drug application before the end of 2013 to allow for clinical trial initiation.

In 2012, researchers at the National Institutes of Health (NIH) independently verified and published a peer reviewed article confirming ERC possess a markedly higher expression of genes associated with new blood vessel formation and stem cell potency compared to bone marrow mesenchymal stem cells.The publication may be found at http://www.translational-medicine.com/content/pdf/1479-5876-10-207.pdf

In addition, our intellectual property was further enhanced with the issuance of patent #8,241,621 covering the use of fat derived stem cells for treatment of autoimmune conditions such as rheumatoid arthritis, type 1 diabetes, and multiple sclerosis.We have also filed 2 patent applications covering the use of ERC for radiation protection and treatment of traumatic brain injury.

Also, in collaboration with several corporate and academic institutions we published a total of 7 peer reviewed papers in 2012 on collaborative breakthroughs we made in the areas of hepatitis, cancer, and prevention of transplant rejection.

Additionally, this year we added two new advisory board members including Gene Ray, Ph.D., and Alexander Gershman, M.D., Ph.D.Dr. Ray was founder of the Titan Corporation, where he served as CEO and a director of the corporation since the company's inception in 1981.In 2011, Titan Corporation was acquired by L-3 Communications for $2.6 billion.Dr. Gershman is one of the first surgeons in the world to apply the method of laparoscopic surgery and robotic-assisted surgery to urology. He currently holds several hospital appointments, including: Director of Institute of Advanced Urology at the Cedars-Sinai Medical Center; Director of Urologic Laparoscopy in the Division of Urology, and Harbor-UCLA Medical Center.

Finally, this year marked a major transition in the leadership of the company.I was appointed to the position of CEO on October 26 and Dr. Thomas Ichim transitioned to the position of President and Chief Scientific Officer.Dr. Ichim has done an outstanding job leading the company for the past four years and I look forward to working closely with him at commercializing the ERC product.

In 2013 our objective will be to meet the following milestones:

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Medistem Inc. Annual Letter to Shareholders