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Collaboration with Intrexon and OvaXon Joint Venture | 12 Months Ended
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Dec. 31, 2014
Collaboration with Intrexon and OvaXon Joint Venture |
Collaboration with Intrexon and OvaXon Joint Venture | 3. Collaboration with Intrexon and OvaXon Joint Venture Scope On December 18, 2013, we entered into a collaboration agreement (the "OvaTure Collaboration") with Intrexon governing the use of Intrexon's synthetic biology technology platform for the accelerated development of our OvaTure platform. The OvaTure Collaboration provides that Intrexon will deliver laboratory and animal data to support the successful filing of an investigational new drug application ("IND") for OvaTure. We will participate as an equal member on the Joint Steering Committee ("JSC") and Intellectual Property Committee ("IPC"). The JSC shall agree upon the services and the activities to be included in the work plan, and IPC has authority over intellectual property matters. We have the tie-breaking vote if there are any disputes with the JSC. Technology Access Fee Payable to Intrexon The technology access fee paid to Intrexon was comprised of (1) the issuance of 273,224 shares, or $2.5 million of common stock issued to Intrexon, upon the execution of the OvaTure Collaboration in December 2013, and (2) a $2.5 million cash payment in December 2014. The technology access fee does not give OvaScience the right to any research and development services, and the technology has no alternative future use to OvaScience. We therefore recorded $4.7 million in research and development expense in the year ended December 31, 2013 with $2.5 million recorded to additional paid-in capital and common stock and $2.2 million recorded in accrued liabilities, which represented the present value of the remaining $2.5 million technology access fee due in December 2014. We accreted the liability up to $2.5 million through interest expense and ultimately paid the full amount in December 2014. The shares issued to Intrexon are subject to "piggy-back" registration rights that entitle Intrexon, unless waived, to have the shares included in any new registration statement filed in connection with an underwritten public offering, subject to underwriter cutback. Research and Development Funding and Potential Commercial Milestone The JSC will also approve a budget for services to be performed under the work plan. We have reimbursed and will reimburse Intrexon for research and development services performed, as dictated by the approved budget. If applicable, OvaScience will also make a commercial milestone payment three months after the first commercial sale of OvaTure. Termination Rights The collaboration has an indefinite term, with OvaScience having the right to terminate the collaboration after 90 days' prior written notice, and either OvaScience or Intrexon may terminate after a material breach by the other party that is not cured within 60 days. We may assign the collaboration in the event of a change of control transaction. Royalties Upon the delivery of laboratory and animal data necessary to support the successful filing of an IND application, we will pay Intrexon a mid-single digit royalty on net sales of OvaTure potential fertility treatments, and the exact royalty will depend upon whether Intrexon completes this milestone within two years after technology transfer. Joint Venture On December 18, 2013, we also entered into a joint venture with Intrexon to leverage Intrexon's synthetic biology technology platform and OvaScience's technology relating to egg precursor cells to pursue the prevention of genetic disease and animal health. We and Intrexon formed OvaXon, LLC ("OvaXon") to conduct the joint venture. Each party contributed $1.5 million to OvaXon and each has a 50% equity interest, and research and development costs and profits will be split accordingly. Each party will also have 50% control over OvaXon with disputes resolved through arbitration, if necessary. We consider OvaXon a variable interest entity. OvaXon does not have a primary beneficiary as both OvaScience and Intrexon have equal ability to direct the activities of OvaXon through JSC and IPC membership and 50% voting rights. OvaXon has been accounted for under the equity method and is not consolidated. This analysis and conclusion will be updated annually to reflect any changes in ownership or power over OvaXon. As of December 31, 2013, we recorded a $1.5 million investment in OvaXon, an equity method investment, with the offset recorded to Accounts Payable. This was paid in January 2014. As of December 31, 2014 OvaXon has incurred expense in excess of the initial investment. The additional expense incurred is included within accrued expenses on our balance sheet, as we had the intent to fund the joint venture in the future. Each party contributed an additional $0.8 million in January 2015.

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