Item 1.     Business

Overview

OvaScience is a global fertility company developing proprietary potential treatments for female infertility based on scientific discoveries about the existence of egg precursor, or EggPC ^SM , cells. The current standard of treatment for infertility is in vitro fertilization ("IVF"), IVF, however, has a 73% average failure rate per cycle based on a 2014 report from the Center for Disease Control and Prevention (CDC). A woman is born with a set number of eggs that die over time. EggPC cells have the ability to mature into new healthy eggs, thereby enabling new fertility treatment options. Our patented technology is based on these newly discovered EggPC cells and represents a new fertility treatment option.

These EggPC cells are immature egg cells found in the protective outer lining of a woman's own ovaries. These immature egg cells have the ability to grow into fresh, young, healthy eggs. Our portfolio of fertility treatment options uses our patented technology including proprietary methods to identify and isolate EggPC cells from a patient's own ovarian tissue. By applying our EggPC technology platform in unique ways, we have commercialized one fertility treatment and are developing new fertility treatment options that are designed to improve egg health and revolutionize the fertility treatment landscape.

More women around the world are waiting until later in life to start families and are in need of new fertility treatment options. As of 2016, approximately 9% of women of reproductive age (20-42 years) worldwide are estimated to be infertile, or about 83 million women. Fertility decreases with age. The main cause of age related infertility is poor egg health, which is linked to a reduction in the number of functioning mitochondria. Unfortunately, many women cannot undergo IVF as they do not want or cannot have hormone treatment, or they make an insufficient number of eggs - or no eggs at all. The EggPC cell technology can potentially offer new options to those women.

The OvaTure ^SM  treatment is a potential next-generation fertility treatment that could help a woman produce healthy, young, fertilizable eggs without the need for hormone injections. The OvaTure treatment seeks to mature a woman’s own EggPC cells into eggs outside her body. This potential treatment may be an option for women with compromised eggs, who are unable to make eggs, or who may be unwilling or unable to undergo hormone hyperstimulation.

The OvaPrime ^SM  treatment is a potential fertility treatment that could enable a woman to increase her egg reserve. Approximately thirty-two percent of assisted reproductive technology (ART) cycles are performed on women with diminished ovarian reserve based on a 2014 report from the CDC. The OvaPrime treatment is designed to replenish a woman’s egg reserve by transferring a patient’s EggPC cells from the protective ovarian lining back into the patient’s own ovaries where they may mature into fertilizable eggs during the IVF process.

Our first commercial treatment, the AUGMENT ^SM  treatment, is specifically designed to improve egg health by supplementing a mitochondrial deficiency which may, in turn, offer the potential for enhanced IVF success rates. With the AUGMENT treatment, energy-producing mitochondria from a woman’s own EggPC cells are added to the woman’s mature eggs during the IVF process to supplement the existing mitochondria.

We believe our EggPC technology has the potential to make significant advances in the field of fertility because it is designed to address poor egg health and embryo quality due to age and other causes. We believe our EggPC technology could improve IVF by:

Increasing live birth rates and reducing the number of IVF cycles . By improving egg health, we believe we may increase the percentage of live births and reduce the number of IVF cycles required.

Reducing the incidence of multiple births . By generating higher quality eggs, we believe our EggPC technology may allow for the transfer of fewer embryos per IVF cycle and, as a result, lower the incidence of multiple births and the associated complications.

Lowering the overall cost of the IVF process . If we reduce the number of IVF cycles required for a live birth and the incidence of multiple births, we believe our fertility treatment options may also lower the overall costs associated with the IVF process.

Replenishing the ovary for women who make too few or no eggs . Our OvaPrime treatment is designed to replenish a woman’s egg reserve by transferring a patient’s EggPC cells from the protective ovarian lining back into the patient’s own ovaries where they may mature into fertilizable eggs.

Reducing the need for hormonal hyperstimulation. We are designing our OvaTure treatment to mature EggPC cells into fertilizable eggs in vitro, or outside the body. If successful, the OvaTure treatment could reduce, or possibly eliminate, the need for hormonal hyperstimulation for the maturation of multiple oocytes prior to egg retrieval in the IVF process.

Developing new treatments for diseases. OvaXon ^SM is a joint venture with Intrexon, which is focused on developing significant improvements in human and animal health using our EggPC cell technology and Intrexon’s synthetic biology and high throughput platform for applications.

Global Fertility Market

In 2013, the European Society for Human Reproduction, or ESHRE, the mission of which is to promote the understanding of reproductive biology and medicine, reported that the worldwide prevalence of infertility among women aged 20 to 44 was approximately 9%. Based on our company estimate, there were 2.6 million IVF (intracytoplasmic sperm injection, or ICSI) cycles performed globally in 2016, and the number of women seeking treatment for infertility is growing in certain regions (Figure 1). ESHRE estimates that 1 in 6 couples worldwide experience some form of infertility. Female infertility contributes to 65-80% of all cases. According to a 2016 report from Grand View Research, the global IVF market in 2014 was valued at $11.5 billion, and projected to grow to $27.8 billion by 2022.

IVF Treatment and Success

IVF is one of the most common procedures in use today to address infertility.

An IVF procedure (Figure 2) typically begins with hyperstimulation of the woman's ovaries by a combination of fertility hormones. Then one or more eggs are taken from the woman's ovarian follicles and fertilized in vitro with either standard insemination, or ICSI, in which a single sperm is injected by needle into the egg. If the egg is healthy and has enough energy, it will start to divide, and the resulting embryo can be transferred into the woman's uterus 3-5 days after ICSI. These steps typically occur over several months.

Fertility decreases with age because of a decline in both egg health and embryo quality. A key factor for egg health and embryo quality is the energy level in the egg. Figure 3 demonstrates that IVF success declines with age if a woman is using her own egg. The IVF procedure also may be performed using eggs donated from another woman (donor egg). When a woman chooses to use a younger woman's donor egg, studies show that success rates are similar to a younger woman's.

Despite relatively low success rates, risks and other shortcomings, the use of IVF treatments has become increasingly common, especially for women faced with declining fertility due to their age.

In many markets globally, IVF is paid for out-of-pocket, particularly in high growth areas outside the European Union ("EU"), and the United States. Many third party payors, including national health services or government funded insurance programs, as well as private payors, place significant restrictions on coverage and reimbursement for IVF and ART procedures. These restrictions include limits on the types of procedures covered, limits on the number of procedures covered and overall annual or lifetime dollar limits on reimbursement for IVF and other ART procedures. Our preliminary market research indicates that this is primarily due to the fact that many women seeking IVF treatments are of advanced maternal age and are concerned that fertility and IVF success rates will continue to decline over time. As a result, women and couples will frequently pay out of pocket for fertility treatments, such as IVF, rather than avail themselves of other step-based approaches to fertility treatment, such as oral fertility drugs to stimulate ovulation or intrauterine insemination procedures, that may be required by insurance programs.

As shown in the following chart, according to a 2014 Centers for Disease Control report, IVF pregnancy success rates for women over age 35 remain relatively flat, regardless of the woman's age, when using donor eggs.

The Discovery of Egg Precursor Cells

In 2004, one of our scientific founders, Jonathan Tilly, Ph.D. (who at that point in time was the co-founder and Director of the Vincent Center for Reproductive Biology at Harvard Medical School and the Massachusetts General Hospital ("MGH"), and is currently the Chair of Northeastern Department of Biology), discovered the existence of EggPC cells within the ovaries of adult mice. Subsequent research by Dr. Tilly demonstrated that these EggPC cells also exist in human ovaries and have the potential to mature into eggs and, therefore, to replenish a woman's egg supply. This research demonstrated that these EggPC cells might provide a source of fresh cellular components, such as mitochondria, that could potentially be used to enhance the health of existing eggs.

Dr. Tilly discovered the existence of mouse EggPC cells by staining the outer cell layer of the ovary using an antibody that binds specifically to a protein found on EggPC cells called mouse VASA homologue. Following publication of this discovery in Nature Medicine in 2004, Dr. Tilly performed additional research, beginning in 2005, which demonstrated the existence of human EggPC cells in adult human ovaries. In this research, Dr. Tilly replicated the results obtained with mouse tissue using human ovarian tissue. Dr. Tilly was able to isolate precursor cells in the ovaries of reproductive age women using an antibody that binds to the human VASA analogue protein, which is found on human EggPC cells. Dr. Tilly also conducted an experiment in which human EggPC cells were isolated in vitro and then grafted into female mouse hosts and matured in vivo into eggs that exhibited a genetic signature indicating the eggs could be fertilized. Dr. Tilly's research findings with respect to human EggPC cells were published in the March 2012 issue of Nature Medicine . These findings have been corroborated by multiple independent laboratories.

We hold an exclusive license from MGH to multiple issued patents as well as various patent applications directed to methods of identifying and isolating EggPC cells, compositions comprising EggPC cells and methods of using EggPC cells to treat infertility and related disorders.

The OvaTure Treatment

The OvaTure ^SM  treatment is a potential next-generation fertility treatment that could help a woman produce healthy, young, fertilizable eggs without the need for hormone injections. The OvaTure treatment seeks to mature a woman’s own EggPC cells into eggs outside her body. This potential treatment may be an option for women with compromised eggs, who are unable to make eggs, or who are unable or unwilling to undergo hormone hyperstimulation. The OvaTure treatment would offer patients a treatment option who were not originally indicated for IVF.

In December 2013, we entered into a collaboration with Intrexon, a leader in synthetic biology, to accelerate development of OvaTure, which we refer to as the OvaTure Collaboration. The companies also formed OvaXon LLC, a joint venture designed to develop applications to prevent inherited human diseases and improve animal health.

In 2016, the OvaTure Collaboration and OvaXon generated data supporting the characterization and developmental competence of human and bovine EggPC cell derived-eggs, respectively. Demonstrating developmental competence is a critical step towards successfully maturing an EggPC cell into a fertilizable egg, as it indicates an egg may potentially be fertilized and develop into an embryo. To demonstrate our current progress in growing EggPC cells into mature eggs, it is important to understand a concept known as gaining developmental competence, which is a series of changes that can be observed in a maturing egg as it prepares for fertilization and subsequent embryo development. In nature these steps towards gaining developmental competence happen in a defined sequence as the egg matures, and in the laboratory we use genetic and morphological criteria to measure the progress of our EggPC cell derived eggs.

The critical steps in defining developmental competence can be broken into two categories: cytoplasmic and nuclear maturation. Cytoplasmic maturation prepares the egg for fertilization by redistributing organelles and initiating post-transcriptional modification of mRNA; it is typically associated with an increase in cell volume. Mature eggs are the single largest cell in the body. In contrast, EggPC cells are quite small - less than 10 microns in both bovines and humans. We have made significant progress in demonstrating cytoplasmic maturation using our in vitro system. In the bovine models, we have observed growth from approximately 10 micron EggPC cells to approximately 120 micron eggs, while in human models, the EggPC cells have increased to approximately 100 micron eggs. We have also observed the formation of the zona pellucida in both human and bovine models; this is the thickened outer membrane that develops to protect the maturing egg and prevent fertilization from multiple sperm.

In conjunction with cytoplasmic maturation, nuclear maturation also prepares the egg for fertilization by organizing the genetic material. An immature egg has a germinal vesicle (GV), an enlarged nucleus that appears before meiotic division is completed. The next step in gaining developmental competence is nuclear maturation, which begins with the dissolution of the nuclear membrane, a process known as germinal vesicle breakdown (GVBD). The chromosomes then condense and align on the metaphase plate in preparation for their separation during metaphase II (MII). We have made great progress in demonstrating aspects of nuclear maturation using our in vitro system. In both bovine and human models, we have observed EggPC cell-derived eggs that have a GV- and we have also observed the condensed chromosomes reorganize and segregate into two sets of chromosomes. In addition, we have observed EggPC cell-derived eggs that have a polar body, one of the small cells produced during meiotic division of developing eggs that enable the correct number of chromosomes to end up in the fertilized zygote.

In addition to the genetic and morphological criteria, we performed functional tests to determine the eggs’ status. One is a brilliant cresyl blue or BCB test. BCB is a blue dye which is metabolized by glucose-6-phosphate dehydrogenase. If you add BCB and the glucose-6-phosphate dehydrogenase metabolizes it, the cell is still growing and appears clear under a microscope. If the cell has stopped growing and is mature, it turns blue or BCB positive. Our research thus far has resulted in blue bovine and human eggs - an indication they are both mature.

Another functional test used to demonstrate developmental competence is parthenogenetic activation, which is the chemical induction of egg cleavage. It is used to determine if an egg is mature enough to be fertilized and is performed by chemically making the egg think that that sperm has entered it, and observing whether the egg divides. In bovine models, we have shown that the EggPC cell-derived eggs can be induced to divide into two cells, then into four cells, after parthenogenetic or chemical activation.

The figure below outlines what we believe are the stages of development from EggPC cell to embryo:

The figure below outlines our progress in growing EggPC cells into mature eggs:

The figure below outlines what we believe are key genetic and morphological criteria for an EggPC cell maturing into an egg:

The figure below outlines functional tests that we believe reinforce egg maturation:

In summary, as eggs mature in nature, they would begin to increase in size and develop a thickened zona pellucida. The nucleus would enlarge and form a germinal vesicle - which would then break down to allow the chromosomes to condense and separate, keeping half the genetic material and the majority of the cytoplasm in the egg and placing the remainder in the polar body for disposal. At this point the egg would be ready to fertilize. To date we have observed eggs at various stages of

development that display the stage-appropriate hallmarks of a maturing egg and are pleased to have begun bovine fertilization studies. As we announced at the JP Morgan Healthcare Conference in 2017, we are working towards having a fertilized bovine egg by end of 2017; an embryo transfer by the end of the first quarter of 2018; and ultimately a bovine birth by the end of the first quarter of 2019.

Before we can fertilize human eggs for research purposes, we must have specific authorization. To that end, we are working with clinical partners to secure the appropriate authorization. In the meantime, we are working to make the maturation of human eggs a more repeatable, robust process so that we can increase the likelihood of success in our fertilization studies.

As we continue to progress both of these programs, we plan to approach regulatory authorities at the appropriate time to discuss our strategy moving forward.

The figure below outlines our clinical goals for our OvaTure treatment:

Our goals are forward looking statements, and there are a number of risks and uncertainties that could cause our actual results to differ materially from our forward looking statements. Please see the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.”

Collaboration with Intrexon to Accelerate Development of OvaTure

In December 2013, we entered into 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 OvaTure development. Upon the delivery of laboratory and animal data, we will incur an obligation to pay Intrexon a mid-single digit royalty on net sales of any OvaTure fertility treatment in the future, and the exact royalty will depend upon the timing of the completion of the milestone.

As a technology access fee, we (1) issued Intrexon 273,224 shares of our common stock worth approximately $2.5 million on the date of issuance upon the execution of the OvaTure Collaboration in December 2013, and (2) paid Intrexon $2.5 million cash in December 2014. We also agreed to a commercial milestone payment three months after the first commercial sale of OvaTure. 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.

We may terminate the OvaTure Collaboration after ninety (90) days prior written notice, and either party may terminate after a material breach by the other party that is not cured within sixty (60) days. We may assign the OvaTure Collaboration in

the event of a change of control transaction. In the event that we pursue the OvaTure program on its own after terminating the OvaTure Collaboration, the royalty will apply if Intrexon intellectual property is utilized.

OvaXon Joint Venture with Intrexon

In December 2013, we also entered into a joint venture with Intrexon to leverage Intrexon's synthetic biology technology platform and our technology relating to EggPC cells to pursue the development of potential fertility treatments within fields-of-use defined under the joint venture, which include prevention of genetic disease and animal health. The global animal genetics market is estimated at $3.7 billion as of 2016 and estimated to increase to $5.5 billion by 2021, a compounded annual growth rate of 8.4% for that time period.

We and Intrexon formed OvaXon to conduct the joint venture. Each party contributed $1.5 million to OvaXon and each has a 50% equity interest, with research and development costs and profits to be split accordingly. OvaXon is governed by a board of managers, which have equal representation by us and Intrexon. Pursuant to an Intellectual Property License between us and OvaXon, we licensed our technology in the field of the joint venture to OvaXon, and OvaXon entered into a collaboration agreement with Intrexon to develop our technology in the field utilizing Intrexon's synthetic biology platform.

We recorded our initial investment in OvaXon as an equity method investment in December 2013. As of December 31, 2015 , OvaXon incurred expense in excess of the accumulated investment to-date. The additional expense incurred were included within accrued expenses on our balance sheet, as we had committed to provide additional funding in the future. We made additional contributions of $1.8 million in 2016. As of December 31, 2016 , our equity investment in OvaXon was approximately $0.1 million.

The OvaPrime Treatment

T he OvaPrime treatment is a potential fertility treatment that could enable a woman to increase her egg reserve. It is designed to replenish a woman’s egg reserve by transferring a patient’s EggPC cells from the protective ovarian lining back into the patient’s own ovaries where they may mature into fertilizable eggs during the IVF process. Approximately thirty-two percent of ART cycles are performed on women with diminished ovarian reserve. We reported large animal toxicology and small animal proof-of-concept studies relating to the OvaPrime treatment in 2014.

In August 2015, we also completed a good laboratory practices level toxicology study in cynomolgus monkeys which demonstrated the safety of the OvaPrime treatment method in a non-human primate model. All animals survived to the scheduled necropsy and no morbidity was observed. Additionally, no significant pre-to-post within-animal changes in hematology, serum chemistry, or urinalysis were observed, and all animals reestablished menstrual cycles within 69 days of egg precursor cell reintroduction. Ovarian follicular distribution at the final necropsy was comparable in the 3 dosage groups, suggesting that there was no disruption to normal ovarian physiology.

In December 2015, we agreed to an investigator sponsored study which continues in the UAE to assess the safety of the OvaPrime treatment. The primary objective of this study is to assess the use of OvaPrime in women undergoing IVF who are diagnosed with either Poor Ovarian Response (POI) (also known as premature ovarian failure (POF)), or Diminished Ovarian Response (DOR). The primary outcome of the clinical study is to assess the patient’s reproductive and fertility outcomes as assessed by egg quality, fertilization success and embryo quality; change in AMH, FSH and estradiol levels from baseline and change in the number of follicles from baseline in the treated ovary compared to the control ovary. This study is still ongoing.

In 2016, we received an IRB approval to begin an OvaPrime clinical trial in Canada. We have since begun enrolling and treating patients in our OvaPrime clinical trial, titled “A Single Center, Prospective, Controlled Pilot Study of OvaPrime Procedure”, which is being performed to evaluate the safety of the OvaPrime procedure in subjects with POI or DOR. Seventy subjects will be enrolled in this trial. Each subject will have one ovary exposed to the EggPC cells, while the other ovary is exposed to the EggPC vehicle as a means to have each subject serve as her own control. Results between the treatment and control ovary will be examined for relevant endpoints such as antral follicle counts.

The primary study endpoint is to evaluate the safety of all subjects regardless of pregnancy outcome. The secondary study endpoint is to assess changes in women’s hormonal and follicular development and occurrence of pregnancy.

We have completed enrollment of 50 patients under the original protocol of the study. We expect to enroll an additional 20 patients under the expanded protocol of the study, which was approved by the IRB, by the end of the first half of 2017.

The current clinical milestones for our OvaPrime clinical study in Canada are as follows:

In addition to the clinical milestones, data milestones for our OvaPrime clinical study in Canada include:

The figure below outlines our clinical goals for our OvaPrime treatment:

Our goals are forward looking statements, and there are a number of risks and uncertainties that could cause our actual results to differ materially from our forward looking statements. Please see the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.”

The AUGMENT Treatment

Our first treatment, the AUGMENT treatment, has been introduced in our clinic accounts outside of the United States. The AUGMENT treatment is not available in the United States. We plan to meet with the United States Food and Drug Administration, or FDA, in the first half of 2017, as part of our ongoing exploration of potential entry into the US market. An AUGMENT treatment cycle begins upon our receipt of the patient's ovarian tissue after biopsy, which is obtained through a biopsy performed by the patient's doctor prior to hormone stimulation. Our proprietary process identifies and isolates the patient’s own EggPC cells, and then the patient’s own mitochondria from these EggPC cells are further isolated. The patient’s own mitochondria are then injected into her egg at the time of ICSI. We expect to receive payment before processing the patient's tissue and defer revenue until we have met all of our treatment obligations, including the delivery of the mitochondria

to the clinic. Based on our experience to date, the period from receipt of the patient’s tissue to when we expect to record revenue is expected to range from 30 to 120 days or more. Within certain of our sales programs, revenue recognition may be further deferred.

As part of the AUGMENT treatment, a woman's eggs are injected with mitochondria from her own EggPC cells into her egg during IVF. This has the potential to improve egg health. Improved egg health may offer the potential for enhanced IVF success rates.

On December 21, 2016, we announced a strategic shift whereby we will continue to make the AUGMENT treatment available to patients at our clinic accounts in Canada and Japan, but will slow commercial expansion of the AUGMENT treatment and reassess our ongoing and planned clinical studies of AUGMENT.

Our plans are forward looking statements, and there are a number of risks and uncertainties that could cause our actual results to differ materially from our forward looking statements. Please see the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.”

Regulation of the AUGMENT Treatment

In those countries where we have introduced the AUGMENT treatment, we believe that the AUGMENT treatment is not subject to the traditional regulatory requirements (e.g., lengthy pre-market review and approval of an application for marketing authorization) that apply to drugs, biologics, medicinal products and medical devices. However, applicable regulatory bodies may disagree with our view. If they do, we and our clinic accounts may suffer significant delay or expense or may cease offering the treatment in such countries.

The countries where we are offering the AUGMENT treatment do, in some cases, have regulations that govern IVF and other fertility treatments, which vary country by country. Those regulations may apply to the AUGMENT treatment. In some countries, there are specific fertility regulatory authorities, such as the United Kingdom’s Human Fertilisation and Embryology Authority ("HFEA"), which license IVF facilities and determine what procedures such establishments may perform. In other countries, the national health authority may delegate the review of a fertility treatment to an industry self-regulatory body, an institutional review board, or other body. For example, the approval of our clinic account’s application to use the AUGMENT treatment in Japan was made by the Japan Society of Obstetrics and Gynecology ("JSOG"). Further, the investigator sponsored study of the AUGMENT treatment that is conducted by the IVI Group in Spain, was approved by La Comisión Nacional de Reproducción Humana Asistida ("CNRHA").

The United States does not have a fertility regulatory body separate and apart from the FDA. In September 2013, we received an "untitled" letter from the FDA advising us to file an IND application for the AUGMENT treatment. Following the receipt of the FDA letter, we chose to suspend the availability of the AUGMENT treatment in the United States. We plan to meet with the FDA in the first half of 2017, as part of our ongoing exploration of potential entry into the U.S. market.

We, together with our clinic accounts, plan to apply on a country by country basis for whatever licenses or approvals, if any, are required to offer the AUGMENT treatment. In some cases, there are no clear guidelines on what standards may apply to the AUGMENT treatment or what licenses or approvals may be required, and we therefore have engaged and will continue to engage in discussions with regulatory authorities in certain of the countries in which we have introduced the AUGMENT treatment. If we or our clinic accounts are unable to obtain any required licenses or approvals in a particular country, if the application process takes longer than expected, or if additional licenses or approvals are required to commercialize the treatment on a large scale, then our introduction of the AUGMENT treatment in such countries may be delayed, we may incur additional expenses, and we may determine not to provide the treatment in such countries.

The Role of Mitochondria in Egg Health

Fertility decreases with age, and the energy levels in the egg are believed to play a major role in this decline (Figure 3). After fertilization, the early stage embryo requires energy for cell division. Inadequate energy results in a failure of the newly formed embryo to develop. We believe that the energy level in a woman's eggs may be supplemented, and the success of embryo development improved, by the injection of mitochondria from the woman's own EggPC cells into her egg at the time of fertilization.

Animal Studies. Studies published in peer reviewed medical journals, including Human Cell (2004), Electronic Journal of Biology (2005), Reproduction Research (2006) and Reproductive Biomedicine (2011), provided evidence of the effects of mitochondria on egg health. In these studies, which involved a number of species, including bovine, porcine, rabbit and murine, third-party scientists demonstrated that the addition of mitochondria to eggs with mitochondrial deficiencies increased cellular energy levels, egg health and the likelihood of fertilization and healthy live births.

Donor Mitochondria Studies. In humans, clinical case reports published in the peer-reviewed medical journals Molecular Human Reproduction (1998) and Human Reproduction (2001), researchers transferred cytoplasm from the eggs of younger women donors into the eggs of older women who failed multiple IVF cycles. The cytoplasm is the liquid portion of a human cell that surrounds the nucleus and contains the egg's mitochondria. Each of these reports showed increased rates of fertilization, embryo development, implantation and pregnancy for the older women whose eggs were transfused. In one of these published reports, approximately 30 women who had previously failed two to five IVF cycles, achieved 13 pregnancies and delivered 16 healthy offspring. Additional published reports showed similar success rates ranging from 25%-44% for women who had previously failed multiple cycles and had not achieved a pregnancy.

These clinical case reports served as the basis for the scientific hypothesis that the addition of healthy donor mitochondria might be used to improve the quality of eggs with mitochondrial deficiencies. However, following publication of these initial clinical reports, many scientists and clinicians questioned the long-term safety of the use of third party donor mitochondria in humans because mitochondria contain DNA. Mitochondria produce energy in all cells of the body. Unlike nuclear DNA, contained in the nucleus, which is inherited from two different people, half from the biological mother and half from the biological father, mitochondrial DNA is inherited solely from the mother. As a result, while the process appeared to be safe with respect to the fertilized egg and the patient, scientists and clinicians questioned whether the presence of mitochondria, and therefore mitochondrial DNA, from two different women might adversely impact a child's health later in life. In response to these concerns, the FDA stated that the use of cells in therapy involving the transfer of third party genetic materials, including mitochondrial DNA, requires submission of an Investigational New Drug application, or IND.

Our Approach. The approach we are using with the AUGMENT treatment builds on these reports but uses a woman's own mitochondria from her own EggPC cells to improve her fertility instead of third-party donor mitochondria. While all cells contain mitochondria, we believe the mitochondria from cells involved in reproduction, known as germline cells, as opposed to other cells in the body, known as somatic cells, are the ideal source of mitochondria for transfer to improve egg health. This is because somatic cells are exposed to environmental toxins and cell waste products that may cause mutations or deletions in mitochondrial DNA that can be passed on during cell division. These mutations and deletions can decrease the quality of the mitochondria and the ability to produce energy. In contrast, the mitochondrial DNA from germline cells contain minimal mutations and deletions. Because the mitochondria within an egg are the template for all subsequent cell reproduction in the offspring, we believe that it is necessary to use high-quality mitochondria to improve egg health.

The approach we are using with the AUGMENT treatment is to use germline mitochondria from the patient's own EggPC cells to improve the quality of the patient's eggs. By using mitochondria from the woman's own EggPC cells, instead of from a third party donor, the AUGMENT treatment does not involve the transfer of third-party genetic material.

Publication of AUGMENT Treatment Experience in Peer-Reviewed Journal. In August 2015, the first published analysis comparing the AUGMENT treatment to standard IVF within the same woman within the same cycle was included in the peer-reviewed Journal of Fertilization: In Vitro- IVF-Worldwide Reproductive Medicine, Genetic & Stem Cell Biology . The analysis demonstrated statistically significant higher rates of embryo selection and transfer with the AUGMENT treatment based on standard embryo quality measures, including preimplantation genetic diagnosis/screening, resulting in statistically significant higher rates of pregnancy.

AUGMENT Treatment Steps

We designed the AUGMENT treatment to use mitochondria from a woman's own EggPC cells in IVF procedures to improve the energy and health of the woman's eggs. The following is a summary of the process that we are using to prepare the patient's own mitochondria for injection into one of her own mature eggs during IVF:

Each of the steps described above follows routine clinical laboratory processes and procedures, and none of these steps requires new methods, equipment or technologies to execute. Specifically, the process of isolating the EggPC cells is performed using commercially available separation techniques. However, we have developed a proprietary monoclonal antibody to identify these cells, as the commercially available antibodies have been shown to be far less than optimal. The proprietary antibody has enabled us to establish a reliable and consistent method to readily identify and isolate the EggPC cells. Because the EggPC technology serves as the basis for all of our fertility treatments, including those on the market and in development, our proprietary monoclonal antibody and proprietary process by which EggPC cells are identified and isolated, together with a number of issued and pending patents, provides a strong intellectual property foundation.

We have established current Good Tissue Practices ("cGTP")-compliant facilities and currently perform the steps in the process ourselves in our laboratories either within or contiguous to the IVF clinics in which the AUGMENT treatment is offered.

Research and Development Spending

During the years ended December 31, 2016 , 2015 and 2014 we spent approximately $21.6 million , $18.4 million and $21.8 million , respectively, on our research and development activities.

Manufacturing

We have established cGTP-compliant laboratories to perform the necessary steps for AUGMENT and OvaPrime either within or contiguous to the international IVF clinics in which our fertility treatments are offered.

In addition, we have contracted with a third-party supplier to perform the identification and isolation of EggPC cells and the preparation of mitochondria steps in the AUGMENT process in the event we decide to undertake offsite manufacturing. Our supplier has significant experience in tissue and cell therapy manufacturing. In regions outside of the United States, we may contract with third parties, through partnerships, out-licenses or other arrangements, to process and manufacture our potential fertility treatments.

Marketing and Sales

During 2016, we continued to expand our global sales and marketing team in anticipation of a commercial launch of our AUGMENT treatment in regions outside of the United States. In December 2016, we announced a corporate restructuring based on a strategic decision to slow our commercial expansion, which included a reduction of our workforce, including our global sales and marketing team.

UK Headquarters and Foreign Subsidiaries

We have established international headquarters in the United Kingdom to coordinate our international commercial efforts. We have also established subsidiaries in certain key regions where we will offer our fertility treatments. These subsidiaries are part of an international legal entity structure through which we plan to (and have, in some cases) license the ex-US commercial rights to the AUGMENT treatment, as well as the OvaPrime treatment, OvaTure treatment and any other potential future products or treatments. This arrangement would allow any potential value enhancement and future profits for the assets to be shared between us and the subsidiaries.

Intellectual Property

We believe we have a strong and growing intellectual property portfolio. We aggressively strive to protect the proprietary technology that we believe is important to our business, including seeking and maintaining patents intended to cover our treatments and compositions, their methods of use and processes for their manufacture, as well as any other inventions that are commercially important to the development of our business. We seek to obtain domestic and international patent protection, and endeavor to promptly file patent applications for new commercially valuable inventions. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.

Our success will depend on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to our business, defend and enforce our patents, preserve the confidentiality of our trade secrets and operate without infringing the valid and enforceable patents and proprietary rights of third parties. We will also rely on continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position.

Patents and Patent Applications

As of February 24, 2017, we own or have exclusively licensed 58 issued patents in 44 countries and jurisdictions and have more than 150 applications pending in more than 130 countries (including applications directly filed in countries and applications filed in regional patent offices), with three of the pending applications currently in allowance.

One family of patents and applications that we own by way of assignment from our own inventors provides protection into 2035 and is directed to a plurality of monoclonal antibody compositions and methods of using those compositions to isolate EggPC cells, a step common to each one of our AUGMENT, OvaPrime and OvaTure treatments. This family includes two issued U.S. patents, one pending U.S. application, and approximately fifty patent applications pending or in the process of being filed in nearly 130 foreign countries.

We have exclusively licensed a portfolio of patent applications owned or co-owned by The General Hospital Corporation, the corporate entity of MGH, pursuant to an agreement that is summarized below. As of February 24, 2017, we held an exclusive license under this agreement to seven issued U.S. patents owned by MGH, three pending U.S. non-provisional patent applications owned by MGH, forty-four patents issued by patent offices outside of the United States which are owned by MGH, sixty-eight applications pending with patent offices outside of the United States which are owned by MGH, two pending U.S. non-provisional applications co-owned by MGH and The President and Fellows of Harvard College, or Harvard, and seventeen applications pending in patent offices outside of the United States which are co-owned by MGH and Harvard.

One family of patents and applications that we have licensed from MGH is directed to female germline stem cells, including methods of isolating such female germline stem cells and various uses for such female germline stem cells, including methods for IVF, methods for egg production, methods to treat infertility and methods to restore ovarian function. This family includes issued patents in the U.S., Canada and 30 European countries, all of which will expire in May 2025. We believe that some of the patents of this family provide protection for therapeutic compositions comprising EggPC cells, which are referred to in the patents as female germline stem cells, and that some of the patents of this family provide protection for elements of the manufacturing process for obtaining such therapeutic compositions.

A second family of patent applications that we have licensed from MGH is directed to methods and compositions for producing female germline stem cells or oocytes from stem cells derived from either bone marrow or peripheral blood. This family includes two pending U.S. non-provisional applications and one Canadian application, which, if issued as patent(s), also would expire in May 2025. We believe that patents issuing from this family may provide protection for an alternative method of obtaining EggPC cells.

A third family of patent applications that we have licensed from MGH is directed to methods and compositions for autologous germline mitochondrial energy transfer. A total of eighteen patents have issued in this family as of February 24, 2017, including three in the U.S., two in each of Australia and South Africa, and one in each of Canada and Japan and nine other countries/jurisdictions. Further, over fifty applications are pending in the U.S. and foreign patent offices. These applications provide opportunity for obtaining patents not only in the countries/jurisdictions in which at least one patent has already issued, but also in nearly 120 others. The issued patents, and any additional patents claiming priority to the underlying provisional applications, will expire in April 2032 unless patent term extension is granted. We believe that these patents, and any patents issuing from this family, provide protection for the AUGMENT treatment and several important aspects thereof.

A fourth family of patent applications that we have licensed from MGH and Harvard is directed to methods and compositions for enhancing the bioenergetic status in oocytes or EggPCs. This family includes two pending U.S. non-provisional patent applications, and eighteen applications that are pending with patent offices outside of the United States. The applications in this family provide opportunity for obtaining patents in more than sixty countries/jurisdictions. Any patents claiming priority to the underlying provisional application would expire in April 2032 unless patent term extension is granted. We believe that patents issuing from this family may provide protection for aspects of the AUGMENT procedure, as well as culture media that we may develop in the future.

In our efforts to improve the AUGMENT treatment, we invented a method of isolating mitochondria from EggPCs and concentrating the mitochondria in the picoliter-scale volume required for injection into oocytes as part of the AUGMENT treatment. We own this patent family, with applications currently pending in the U.S., Argentina and Taiwan, and opportunity to file in nearly 150 other countries remaining preserved into the second quarter 2017.

Additionally, we own one issued U.S. patent and one pending U.S. non-provisional patent application, with all issued patents expiring in June 2026. We believe that patents issued or issuing from this family may provide protection for an alternative method of producing healthy eggs.

Trade Secrets

In addition to patents, we expect to rely on trade secrets and know-how to develop and maintain our competitive positions. For example, significant aspects of the AUGMENT treatment are based on unpatented trade secrets and know-how. Trade secrets and know-how can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached and we may not have adequate remedies for any breach. In addition, our trade secrets and know-how may otherwise become known or may be independently discovered by competitors. To the extent that our consultants, contractors or collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Exclusive License Agreement with Massachusetts General Hospital

In June 2011, we entered into an exclusive license agreement with MGH under which we acquired an exclusive, worldwide, royalty-bearing license to specified patent rights owned by MGH and a non-exclusive license under specified know-how to make, use and sell products and processes and to develop and perform services covered by the licensed patent rights or which employ or are based on the licensed know-how in certain specified licensed fields. The license further included the grant to us under certain patent rights co-owned by MGH and Harvard to make, use and sell products and processes and to develop and perform services covered by such patent rights for use in ex vivo human female fertility treatments.

Pursuant to amendments dated September 2011, July 2013, September 2013, November 2013, December 2013 and August 2016, we agreed to expand the licensed field of the patent rights solely owned by MGH to include all uses, including human female fertility, the treatment or prevention of inherited (including mitochondrial) diseases or defects in all animals, including humans, assisted and/or artificial reproductive technology in all non-human animals, the artificial creation of food, research animals and/or animal products, the treatment of menopause and all diagnostics.

Under the terms of this license agreement, as amended, we have agreed to pay MGH upfront license fees, annual license fees and an annual maintenance fee and agreed to reimburse MGH for certain patent related fees and costs incurred by MGH and Harvard, including past patent fees and costs totaling approximately $0.4 million in the aggregate. We also agreed to pay MGH milestone payments of up to an aggregate of approximately $10.9 million upon the achievement of specified developmental and commercialization milestones. We are also obligated under this license agreement to make a payment to MGH upon our consummation of certain specified liquidity events, subject to a specified cap. To date, we have we paid MGH an aggregate of $0.5 million in connection with our consummation of public offerings that fall within the definition of a liquidity event for purposes of this license agreement.

We are further obligated under this license agreement to pay MGH a royalty in the low single digits based on net sales of licensed products and processes that we commercialize under the agreement. Net sales are defined under this license agreement to exclude any amounts billed to patients by clinics and medical practices that use licensed products or perform licensed services for patients, but to include the amounts paid to us by such clinics and medical practices. Our obligation to pay royalties for each licensed product and process expires on a country-by-country basis on the date of expiration of the licensed patent rights that cover that licensed product or process in that country except that, solely with respect to the license under certain patent rights co-owned by MGH and Harvard for ex vivo human fertility treatments, our obligation to pay a royalty will continue at a reduced rate for a period of three (3) years after the expiration of such patent rights if the licensed patent rights covered the licensed product or process in that country prior to expiration. Royalty rates are subject to reduction in any country if we are required to obtain a license from any third party to the extent the licensed patent rights infringe the third party’s patent rights if such payments are in excess of one percent (1.0%) of net sales. If we enter into a sublicense under this license agreement, we will be obligated to pay MGH a percentage of certain consideration paid to us by the sublicensee.

We are required to use commercially reasonable efforts to develop and commercialize licensed products and licensed processes under this license agreement. In particular, we are required to achieve specified development and commercialization milestones in certain countries by specified dates, which dates may be subject to extension by us upon making certain specified payments to MGH.

Under the terms of the agreement, MGH and Harvard have retained the right to practice the licensed patent rights within the licensed fields for research and educational purposes only.

We have the right to terminate the agreement for any reason upon at least 90 days' prior written notice. MGH has the right to terminate the agreement if we fail, subject to a specified cure period, to pay any amounts due and payable under the agreement to MGH, we otherwise materially breach the agreement and fail to cure such breach within a specified cure period, we fail to maintain insurance coverage as required under the agreement, we enter bankruptcy proceedings or make an

assignment for the benefit of our creditors, or we or a sublicensee challenges the licensed patent rights in a legal or administrative proceeding. The agreement otherwise terminates upon the expiration or abandonment of all licensed patents and patent applications

Competition

The biotechnology and pharmaceutical industries are highly competitive and subject to rapid technological change. There are a number of pharmaceutical companies, biotechnology companies, universities and research organizations actively engaged in research and development of potential fertility treatments. Some of these treatments, similar to our current and future fertility treatments, are designed to address the shortcomings of IVF.

In particular, we are aware of a number of companies and laboratories that are currently developing potential fertility treatments intended to identify high quality embryos for use in IVF and a university study of the transfer of granulosa cell mitochondria into eggs. We are also aware of a university study of induced pluripotent stem cells, or iPS, showing that iPS cells can be generated from somatic cells and programmed to become differentiated cells, which can include germline cells such as oocytes. However, we believe it is unlikely this approach would have clinical applications because these are non-germline, pluripotent cells. Novocellus Ltd. is developing an embryo viability test, using culture media, to aid in the selection of embryos used in IVF. We believe that culture media is complementary to our fertility treatment options. FertiliTech and Auxogyn, Inc. are developing hardware and software that analyzes embryo development against cell division timing parameters to help identify the highest quality embryo within a group of embryos. If successfully developed, these products could improve outcomes and alleviate some of the other shortcomings of traditional IVF, thereby decreasing the need for our potential fertility treatments. Fertility Focus, along with strategic partner Norgenix, are developing a fertiloscope for the early diagnosis of, and immediate corrective surgery for, the physical causes of infertility. Molecular diagnostic companies like Reprogenetics are developing novel preimplantation genetic diagnosis and screening methods to detect chromosomal and genetic disorders of embryos prior to transfer back to the women. Testing embryos in this manner may increase the likelihood of pregnancy, reduce the chances of pregnancy loss, and improve the odds of delivery.

There can be no assurance that we will be able to compete effectively. Our competitors may develop and commercialize new technologies before we do, allowing them to offer products, services or solutions that are superior to those that we may offer or that establish market positions before the time, if any, at which we are able to bring potential fertility treatments to the market. Many of our competitors, either alone or with their strategic partners, have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Accordingly, our competitors may be more successful than we may be in developing, commercializing and achieving widespread market acceptance. Our competitors' products may be more effective, or more effectively marketed and sold, than any treatment we may commercialize and may render our potential fertility treatments obsolete or non-competitive before we can recover the expenses of developing and commercializing any of our potential fertility treatments. We anticipate that we will face intense and increasing competition as new treatments enter the market and advanced technologies become available. We also face competition from standard IVF clinics.

For the AUGMENT treatment and OvaPrime treatment, our ability to gain market acceptance will depend on, among other things, our ability to demonstrate improved IVF success rates, thereby reducing the number of cycles required to produce a live birth, our ability to reduce multiple births, and our ability to treat patients that face particular challenges with traditional IVF, such as patients with diminished ovarian reserve. Our ability to gain market acceptance for the OvaTure treatment, if and when introduced, will depend on our ability to demonstrate increased pregnancy and live birth rates as compared to traditional IVF and other infertility treatments, reduced multiple births and a reduction in the need for hormonal hyperstimulation for egg retrieval. We anticipate that price also will be an important competitive factor for all our fertility treatment options. At this time, we cannot evaluate how our potential fertility treatments, if successfully developed and commercialized, would compare technologically, clinically or commercially to any other potential products being developed or to be marketed by competitors.

Government Regulation

Government authorities around the world regulate, among other things, the development, testing, manufacture, quality, approval, distribution, labeling, packaging, storage, record keeping, sale, marketing, import, export and promotion of drugs, biologics and medical devices, as well as other types of medical products and procedures. Most countries also have rules relating to procurement and use of human tissues or cells, and rules relating to assisted human reproduction. Although the specific rules vary country by country, in general different levels of regulation are applicable depending on the nature of the treatment, the level of risk involved, and/or its intended uses. Some classes of products (e.g., treatments regulated as drugs or biologics in the United States, or treatments regulated as medicinal products in the EU) require extensive preclinical testing, clearance to conduct clinical trials, successful completion of clinical trials, and submission and approval of an application for marketing authorization before the therapy can be commercially marketed. Such products also are subject to significant post-marketing requirements.

Many countries also specify various classes of therapies that are exempt from the above-mentioned pre-market review and approval requirements. In these jurisdictions, the development and marketing of such therapies generally do not require the conduct of clinical trials or pre-review and approval of a marketing application by the relevant regulatory authority. In addition, although many such therapies are still subject to post-marketing requirements, these requirements typically are substantially reduced as compared to the requirements for drugs, biologics, medicinal products or medical devices.

There can be no assurance that regulatory authorities in countries where we have introduced, or will introduce, the AUGMENT treatment or the OvaPrime treatment will agree with our determinations that these fertility treatments are exempt from pre-market review and approval as a drug, biologic, medicinal product or medical device. If the regulatory authorities in a given country disagree with our determination, then we likely will be required to cease commercial marketing of that fertility treatment in that country, and may not be able to resume commercial marketing without first demonstrating safety and efficacy through clinical trials, submitting an application for marketing authorization, and receiving approval from the relevant regulatory authorities. In these circumstances, we are likely to be significantly delayed in our ability to commercialize our fertility treatments in such country, or we may elect to cease our commercialization activities in that country altogether. From time to time, we engage in discussions regarding the AUGMENT treatment and our potential fertility treatments with regulatory authorities in certain of the countries in which we have launched or plan to introduce our fertility treatments. We expect to have ongoing dialogue with these regulatory authorities.

With regard to the United States, we commenced a clinical study of the AUGMENT treatment in the United States in 2012. We did so without an IND on the basis of our determination that the AUGMENT treatment was exempt from pre-market review and approval in the United States and did not require an IND to conduct clinical testing. In 2013, however, we received an "untitled" letter from the FDA questioning our determination of exempt status and advising us to file an IND for the potential fertility treatment. We have since discontinued our clinical study and are focused on commercializing our fertility treatments outside of the United States. We plan to meet with the FDA in the first half of 2017, as part of our ongoing exploration of potential entry into the U.S. market.

European Union Requirements

Regulation of Medicinal Products

If the authorities in certain EU countries were to determine that any of our potential treatments are subject to regulation as medicinal products, including as advanced therapy medicinal products, they would be subject to extensive pre- and post-market regulation by regulatory authorities at both the EU and national levels. Advanced therapy medicinal products include tissue engineered products, which are cells or tissues that have undergone substantial manipulation and that are administered to human beings in order to regenerate, repair or replace a human tissue.

Clinical Trials.     Clinical trials of medicinal products in the EU must be conducted in accordance with EU and national regulations and the International Conference on Harmonization, or ICH, guidelines on Good Clinical Practices, or GCP. Prior to commencing a clinical trial, the sponsor must obtain a clinical trial authorization from the competent authority, and a positive opinion from an independent ethics committee. Currently, clinical trial authorization applications must be submitted to the competent authority in each EU member state in which the trial will be conducted. Under the new Regulation on Clinical Trials, which is expected to take effect in October 2018, there will be a centralized application procedure where one national authority takes the lead in reviewing the application and the other national authorities have only a limited involvement. Any substantial changes to the trial protocol or other information submitted with the clinical trial applications must be notified to or approved by the relevant competent authorities and ethics committees.

During the development of a medicinal product EMA, and national medicines regulators within the EU provide the opportunity for dialogue and guidance on the development program. At the EMA level, this is usually done in the form of scientific advice, which is given by the Scientific Advice Working Party of the Committee for Medicinal Products for Human

Use, or CHMP. A fee is incurred with each scientific advice procedure. Advice from the EMA is typically provided based on questions concerning, for example, quality (chemistry, manufacturing and controls testing), nonclinical testing and clinical studies, and pharmacovigilance plans and risk-management programs. Advice is not legally binding with regard to any future marketing authorization application of the product concerned. To date, we have not initiated any scientific advice procedures or other discussions with the EMA or any national regulatory authorities in the EU.

Marketing Authorizations.     After completion of the required clinical testing, we must obtain a marketing authorization before we may place a medicinal product on the market in the EU. There are various application procedures available, depending on the type of product involved. All application procedures require an application in the common technical document, or CTD, format, which includes the submission of detailed information about the manufacturing and quality of the product, and non-clinical and clinical trial information. There is an increasing trend in the EU towards greater transparency and, while the manufacturing or quality information is currently generally protected as confidential information, the EMA and national regulatory authorities are now liable to disclose much of the non-clinical and clinical information in marketing authorization dossiers, including the full clinical study reports, in response to freedom of information requests after the marketing authorization has been granted. Clinical study reports will also be posted on the EMA's website following the grant, denial or withdrawal of a marketing authorization application, subject to procedures for limited redactions and protection against unfair commercial use.

The centralized procedure gives rise to marketing authorizations that are valid throughout the EU and, by extension (after national implementing decisions), in Norway, Iceland and Liechtenstein, which, together with the EU member states, comprise the European Economic Area, or EEA. Applicants file marketing authorization applications with the EMA, but the marketing authorization itself is granted by the European Commission. The centralized procedure is compulsory for medicinal products that (1) are derived from biotechnology processes, (2) contain a new active substance (approved after November 20, 2005) indicated for the treatment of certain diseases, (3) are orphan medicinal products or (4) are advanced therapy medicinal products, such as cell therapy medicines. For medicines that do not fall within these categories, an applicant may voluntarily submit an application for a centralized marketing authorization to the EMA, as long as the CHMP agrees that (i) the medicine concerned contains a new active substance (approved after November 20, 2005), (ii) the medicine is a significant therapeutic, scientific, or technical innovation, or (iii) if its authorization under the centralized procedure would be in the interest of public health.

For those medicinal products for which the centralized procedure is not available, the applicant must submit marketing authorization applications to the national medicines regulators through one of three procedures: (1) a national procedure, which results in a marketing authorization in a single EU member state; (2) the decentralized procedure, in which applications are submitted simultaneously in two or more EU member states; and (3) the mutual recognition procedure, which must be used if the product has already been authorized in at least one other EU member state, and in which the EU member states are required to grant an authorization recognizing the existing authorization in the other EU member state, unless they identify a serious risk to public health.

The EU medicines rules expressly permit the member states to adopt national legislation prohibiting or restricting the sale, supply or use of any medicinal product containing, consisting of or derived from a specific type of human or animal cell, such as embryonic stem cells. Thus, it is possible that the national laws in certain EU member states may prohibit or restrict us from commercializing our fertility treatments, even if they have been granted an EU marketing authorization.

Data Exclusivity.     Marketing authorization applications for generic medicinal products do not need to include the results of pre-clinical and clinical trials, but instead can refer to the data included in the marketing authorization of a reference product for which regulatory data exclusivity has expired. If a marketing authorization is granted for a medicinal product containing a new active substance, that product benefits from eight years of data exclusivity, during which generic marketing authorization applications referring to the data of that product may not be accepted by the regulatory authorities, and a further two years of market exclusivity, during which such generic products may not be placed on the market. The two-year period may be extended to three years if during the first eight years a new therapeutic indication with significant clinical benefit over existing therapies is approved.

There is a special regime for biosimilars, or biological medicinal products that are similar to a reference medicinal product but that do not meet the definition of a generic medicinal product, for example, because of differences in raw materials or manufacturing processes. For such products, the results of appropriate pre-clinical or clinical trials must be provided, and guidelines from the EMA detail the type of quantity of supplementary data to be provided for different types of biological product. There are no such guidelines for complex biological products, such as gene or cell therapy medicinal products, and so it is unlikely that biosimilars of those products will currently be approved in the EU. However, guidance from the EMA states that they will be considered in the future in light of the scientific knowledge and regulatory experience gained at the time.

Post-Approval Controls.     The holder of a marketing authorization must establish and maintain a pharmacovigilance system and appoint an individual qualified person for pharmacovigilance, or QPPV, who is responsible for oversight of that system. Key obligations include expedited reporting of suspected serious adverse reactions and submission of periodic safety update reports, or PSURs.

All new marketing authorization applications must include a risk management plan, or RMP, describing the risk management system that the company will put in place and documenting measures to prevent or minimize the risks associated with the product. The regulatory authorities may also impose specific obligations as a condition of the marketing authorization. Such risk-minimization measures or post-authorization obligations may include additional safety monitoring, more frequent submission of PSURs, or the conduct of additional clinical trials or post-authorization safety studies. Risk management plans and PSURs are routinely available to third parties requesting access, subject to limited redactions.

All advertising and promotional activities for the product must be consistent with the approved summary of product characteristics, and therefore all off-label promotion is prohibited. Direct-to-consumer advertising of prescription medicines is also prohibited in the EU. Although general requirements for advertising and promotion of medicinal products are established under EU directives, the details are governed by regulations in each member state and can differ from one country to another.

Medicinal products may only be manufactured in the EU, or imported into the EU from another country, by the holder of a manufacturing authorization from the competent national authority. The manufacturer or importer must have a qualified person, or QP, who is responsible for certifying that each batch of product has been manufactured in accordance with EU standards of good manufacturing practice, or GMP, before releasing the product for commercial distribution in the EU or for use in a clinical trial. Manufacturing facilities are subject to periodic inspections by the competent authorities for compliance with GMP.

Regulation of Medical Devices

If European regulatory authorities were to determine that any of our potential treatments are subject to regulation as a medical device, the following requirements would apply. A medical device may be placed on the market within the EEA if it conforms to certain "essential requirements". These are general in nature and broad in scope. The most fundamental essential requirement, for example, is that a device must be designed and manufactured in such a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users or other persons. Other essential requirements include that the device must achieve the performances intended by the manufacturer and be designed, manufactured and packaged in a suitable manner, and any undesirable side effect must constitute an acceptable risk when weighed against the performances intended.

The manufacturer is obliged to demonstrate that the device conforms to the relevant essential requirements through a conformity assessment procedure. The nature of the assessment depends upon the classification of the device. The classification rules are mainly based on three criteria: the length of time the device is in contact with the body, the degree of invasiveness, and the extent to which the device affects the anatomy. Class I (low risk) devices are those that do not enter or interact with the body. Class IIa and IIb (medium risk) devices are invasive or implantable or interact with the body. Class III (high risk) devices are those that affect the vital organs.

Conformity assessment procedures for all but the lowest risk classification of device involve a notified body. Notified bodies are entities licensed to provide independent certification of certain classes of medical device. Most notified bodies are private commercial entities, but some are state bodies and others are structured as private non-profit organizations.

EU regulatory bodies are not involved in the pre-market approval of medical devices, with only very limited exceptions (such as medical devices that incorporate a medicinal product as an ancillary substance). The onus of ensuring a device is safe enough to be placed on the market is ultimately the responsibility of the manufacturer and the notified body.

As part of the conformity assessment procedure, the manufacturer will need to conduct a clinical evaluation of the device. This clinical evaluation may consist of an analysis of the scientific literature relating to similar devices, new clinical investigations of the device, or a combination of the two. For class III devices, the conduct of clinical investigations is mandatory. Such studies must adhere to the Declaration of Helsinki, which requires appropriate ethics committee approval of the study.

Once the appropriate conformity assessment procedure for a medical device has been completed, the manufacturer must draw up a written declaration of conformity and affix the CE mark to the device. The device can then be marketed throughout the EEA.

Manufacturers must put in place a device vigilance system that allows them to review relevant post-marketing experience and take corrective actions where necessary. As part of that system, manufacturers must report to the competent regulatory

authorities any adverse incident related to a medical device that leads or might lead, directly or indirectly, to the death of a patient, user or other person or to a serious deterioration in their state of health. They must also report any recalls or other field safety corrective actions.

Human Cells and Tissues

Human cells and tissues that are intended for human applications but that do not fall within the scope of rules governing medicinal products or medical devices are not subject to pre-market review and approval, nor do they require extensive preclinical and clinical testing. However, there are EU rules governing the donation, procurement, testing and storage of human cells and tissues intended for human application, whether or not they are advanced therapy medicinal products. These rules also cover the processing, preservation and distribution of human cell and tissues that are not advanced therapy medicinal products. Establishments that conduct such activities must be licensed and are subject to inspection by regulatory authorities. Such establishments must implement appropriate quality systems and maintain appropriate records to ensure that cells and tissues can be traced from the donor to the recipient and vice versa. There are also requirements to report serious adverse events and reactions linked to the quality and safety of cells and tissues. More detailed rules may exist at the national level.

IVF Treatment

While the procurement, processing and distribution of gametes and embryos for use in IVF and other assisted reproduction treatments falls within the scope of the EU rules governing human cells and tissues, there are no harmonized EU requirements for the performance of IVF and other medical treatments. Instead, the practice of medicine is regulated entirely at the national level in the individual member states. In some EU countries, there are specific regulatory authorities, such as the United Kingdom’s HFEA, which license IVF facilities and determine what procedures such establishments may perform. In other EU countries, the national health authority may review or delegate the review of a fertility treatment to an industry self-regulatory body, an institutional review board, or other body. For example, the investigator sponsored study of the AUGMENT treatment that is conducted by the IVI Group in Spain, was approved by La Comisión Nacional de Reproducción Humana Asistida ("CNRHA").

We believe that neither the AUGMENT treatment nor, when introduced and available, the OvaPrime treatment are subject to regulation as a medicinal product or a medical device in the EU, and instead is subject to the less rigorous regulations that apply to use of human cells and tissues that are intended for human applications and to any national rules that govern IVF treatment. When we proceed with the introduction of our treatments into certain countries within the EU on this basis, there is a risk that European or national regulatory authorities may reach a different conclusion.

United States Requirements

The FDA regulates human cell, tissue, or cellular or tissue-based products ("HCT/Ps") according to a tiered, risk-based approach. Under this approach, some HCT/Ps are regulated as biological products or as drugs or devices under the Public Health Service Act, or PHSA, the Federal Food, Drug, and Cosmetic Act, or FDCA, and the agency’s implementing regulations. Section 351 of the PHSA prohibits the introduction of a biological product into interstate commerce without an FDA-approved application for marketing authorization under that section. For pioneer products, the typical application under section 351 of the PHSA is the biologics license application ("BLA").

Biological products, including certain HCT/Ps, that are regulated under section 351 of the PHSA are subject to significant pre and post-market regulation. Section 351 of the PHSA prohibits the introduction of a biological product into interstate commerce without an FDA-approved biologics license application ("BLA"). After approval, a BLA product is subject to significant requirements relating to, among other things, manufacturing, adverse event reporting, advertising and promotion, distribution, packaging, labeling, import/export, and record keeping.

Certain HCT/Ps, however, are regulated solely under section 361 of the PHSA, which authorizes the FDA to promulgate regulations to prevent the spread of communicable diseases. Such products are referred to as "section 361 HCT/Ps." The FDA will regulate an HCT/P as a section 361 HCT/P if it meets all of the following criteria:

HCT/Ps that meet all of these requirements are deemed are regulated exclusively under section 361 of the PHSA and the FDA's implementing regulations at 21 C.F.R. Part 1271. These regulations impose requirements for registration and listing, donor screening and testing, and good tissue practices, among other things. They do not, however, impose the IND requirements or the pre-market review and approval requirements described above for biologics regulated under section 351 of the PHSA.

Some HCT/Ps may be exempt from the requirements for section 351 biologics and section 361 HCT/Ps. For example, establishments that remove HCT/Ps from a donor and return them to the same donor during a single surgical procedure are exempt from the requirements for both section 351 biologics and section 361 HCT/Ps.

It is not certain how FDA would regulate any of our current or potential fertility treatments. As discussed above, in 2012 we commenced a clinical study of the AUGMENT treatment in the United States, but subsequently received from the FDA an "untitled" letter questioning the status of the AUGMENT treatment as a section 361 HCT/P, and advising us to file an IND for the potential fertility treatment, following which we suspended our commercialization efforts in the United States. We believe that the AUGMENT treatment could meet the criteria for regulation as a section 361 HCT/P, but there is no guarantee that FDA would agree with our classification of the AUGMENT treatment or any of our potential fertility treatments. We plan to meet with the FDA in the first half of 2017, as part of our ongoing exploration of potential entry into the U.S. market.

Other Healthcare Laws and Compliance Regulations

Both in and outside of the United States, our activities may be subject to regulation by various federal, state and local authorities in addition to the FDA or EMA. In the United States, this likely includes the Centers for Medicare and Medicaid Services ("CMS"), other divisions of the U.S. Department of Health and Human Services, such as the Office of Inspector General, and the U.S. Department of Justice and individual U.S. Attorney offices within the Department of Justice, as well as state and local governments, and ex-US equivalents. Our operations in the relevant jurisdictions must comply with all of these applicable requirements or we may be unable to conduct our business or may face civil or criminal sanctions.

We are also subject to varying anti-corruption laws that exist both in the United States, where we are based, and the various countries in which we operate or otherwise offer our fertility treatments. For example, the Foreign Corrupt Practices Act ("FCPA"), prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. The anti-bribery provisions of the FCPA are enforced primarily by the U.S. Department of Justice. The Securities and Exchange Commission (SEC) is involved with enforcement of the books and records provisions of the FCPA. Failure to comply with the FCPA or similar laws in other countries where we operate could subject us to significant penalties that could have a material impact on our business.

Coverage, Pricing and Reimbursement

We believe that very few third party payors, either in the EU, the United States or other countries, including national health services and government funded insurance programs as well as private payors, will agree to cover and reimburse for the OvaTure treatment, the OvaPrime treatment, the AUGMENT treatment, or other potential fertility treatments we may attempt to commercialize. Thus, it is likely that IVF clinics and physicians will be able to use the AUGMENT treatment, the OvaPrime treatment, the OvaTure treatment and our other potential fertility treatments only if the patient can afford and is willing to pay for our treatment out of pocket. The cost of the AUGMENT treatment, the OvaPrime treatment, the OvaTure treatment, and our other potential fertility treatments may be beyond the means of many patients.

Third party payors include government health administrative authorities, managed care providers, private health insurers and other organizations. The process for determining whether a payor will provide coverage for a treatment or procedure may be separate from the process for setting the price or reimbursement rate that the payor will pay for the treatment or procedure. Even if third party payors were to provide some minimal level of coverage and reimbursement for the AUGMENT treatment, the OvaPrime treatment, the OvaTure treatment or our other potential fertility treatments, such third party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness, in addition to the safety and efficacy, of medical products and procedures.

In the EU and elsewhere, governments influence the price of medical products and procedures through their pricing and reimbursement rules and control of national healthcare systems that fund a large part of consumers' medical costs. Some jurisdictions operate positive and negative list systems under which treatments or procedures may be marketed only after a reimbursement price has been agreed upon. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost-effectiveness of our particular treatments or procedures to currently available therapies. Other countries allow medical companies to fix their own prices, but monitor and control company profits. The downward pressure on healthcare costs has become very intense. As a result, increasingly high barriers are being erected to the entry of new treatments and procedures.

Employees

As of December 31, 2016 , we had 118 full-time employees. On December 21, 2016, we announced a corporate restructuring in which we would be reducing our workforce by approximately 30%. The majority of the reduction in workforce occurred in January 2017. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good.

Our Corporate Information

We were incorporated under the laws of the State of Delaware in April 2011 under the name Ovastem, Inc. and changed our name to OvaScience, Inc. in May 2011. Our principal executive offices are located at 9 Fourth Avenue, Waltham, Massachusetts 02451, and our telephone number is (617) 500-2802. Our website address is www.ovascience.com. The information contained on, or that can be accessed through, our website is not a part of this Annual Report on Form 10-K. We have included our website address in this Annual Report solely as an inactive textual reference.

Available Information

You may obtain free copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to those reports, as soon as reasonably practicable after they are electronically filed or furnished to the SEC, on the Investors section of our website at www.ovascience.com or by contacting our Corporate Communications department at (617) 500-2802. The contents of our website are not incorporated by reference into this report and you should not consider information provided on our website to be part of this report.

Item 1A.    Risk Factors

RISK FACTORS

Our business is subject to numerous risks. We caution you that the following important factors, among others, could cause our actual results to differ materially from those expressed in forward-looking statements made by us or on our behalf in filings with the SEC, press releases, communications with investors and oral statements. Any or all of our forward-looking statements in this Annual Report on Form 10-K and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in the discussion below will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may differ materially from those anticipated in forward-looking statements. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosure we make in our reports filed with the SEC.

Risks Related to Our Financial Position and Need for Additional Capital

Our short operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

We commenced active operations in April 2011. Our operations to date have been limited to organizing and staffing our company, business planning, raising capital, acquiring and developing our technology, identifying potential fertility treatments, researching and developing the OvaTure, OvaPrime and AUGMENT treatments, introducing the AUGMENT treatment in

select international IVF clinics, and determining the development and regulatory paths for our fertility treatments. Any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.

We have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by young businesses in new and rapidly evolving fields. For example, to execute our business plan, we will need to be successful in a range of challenging activities, including pursuing clinical trials of the OvaPrime treatment and introducing that treatment into international IVF clinics, completing development and optimization of the OvaTure treatment, continuing to make the AUGMENT treatment available in select international markets, obtaining any required approvals, manufacturing, marketing and selling those potential fertility treatments that we successfully develop, and addressing the challenges of foreign operations.

In addition, as a young business with a short operating history, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown challenges. We recently announced a change in our corporate strategy, including a shift to focus on the development of OvaPrime and OvaTure. We cannot assure you that this shift will be successful.

We have incurred significant losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.

Since our inception, we have incurred significant operating losses. Our net loss was $82.3 million for the year ended December 31, 2016 . As of December 31, 2016 , we had an accumulated deficit of $250.2 million . We have recorded limited revenues to date and have financed our operations primarily through equity financings. We have devoted significant efforts to research and development, acquiring our technology, researching and developing the OvaPrime, OvaTure and AUGMENT treatments and building out our international infrastructure.

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to quarter. We anticipate that our expenses will increase if and as we:

To become and remain profitable, we must develop and eventually commercialize our potential fertility treatments with significant market potential, including the OvaTure treatment and the OvaPrime treatment and continue to offer the AUGMENT treatment commercially, and determine strategies to scale our treatments commercially. This will require us to be successful in a range of challenging activities, completing preclinical and clinical trials for our treatments, obtaining any

necessary regulatory approvals and successfully commercializing, either alone or with partners. We may never succeed in these activities and, even if we do, may never generate revenues that are significant or large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations.

We will need substantial additional funding. If we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate our fertility treatment development programs or commercialization efforts.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the development and commercialization of our fertility treatments. We are focused on developing the OvaTure and OvaPrime treatments and have introduced the AUGMENT treatment in IVF clinic accounts outside of the United States. We expect to incur significant expenses with respect to our continued development and optimization of the OvaTure treatment and our clinical trials for our fertility treatments. Any clinical trials that we are required to conduct for these fertility treatments will be costly. Furthermore, we expect to continue to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate some or all of our research and development programs or commercialization efforts.

We believe that our cash and cash equivalents and short-term investments of approximately $114.4 million at December 31, 2016 , will be sufficient to fund our current operating plan for at least the next 24 months. There can be no assurances, however, that the current operating plan will be achieved or that additional funding, if needed, will be available on terms acceptable to us, or at all.

Our future capital requirements will depend on many factors, including:

Identifying, developing and commercializing potential fertility treatments is a time consuming, expensive and uncertain process that takes years to complete. We may fail to achieve sufficient revenues from our fertility treatments to achieve profitability on our expected timelines or at all. We will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or potential fertility treatments.

Until the time, if ever, that we can generate sufficient revenues from our potential fertility treatments and from the AUGMENT treatment to become profitable, we plan to finance our cash needs through some combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or potential fertility treatments or grant licenses on terms that may not be favorable to us.

We are currently subject to a securities class action lawsuit, the unfavorable outcome of which may have a material adverse effect on our financial condition, results of operations and cash flows.

In October 2015, a purported class action lawsuit was filed against us, certain of our executive officers, the members of our board of directors and certain of the underwriters from our January 2015 follow-on public offering of our common stock by investors alleging violations of the Securities Act of 1933, as amended. On November 9, 2016, a second purported derivative action was filed against certain present and former officers and directors of the company alleging breaches of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement and corporate waste for purported actions related to our January 2015 follow-on public offering. While we believe we have substantial legal and factual defenses to these claims in these lawsuits and we will vigorously defend the lawsuits, the outcome of litigation is difficult to predict and quantify, and the defense against such claims or actions can be costly and divert management resources. In connection with these lawsuits, we could incur substantial costs and such costs and any related settlements or judgments may not be covered by insurance.

We have limited experience in marketing and selling our fertility treatments, and if we are unable to successfully commercialize our fertility treatments, our business and operating results will be adversely affected.

We have limited experience marketing and selling our fertility treatments, and we have had limited success in our commercialization activities to date. We have introduced the AUGMENT treatment in partner IVF accounts outside the United States and will continue to offer the treatment to patients at clinic accounts in Canada and Japan. Our ability to generate revenue in the near term, however, will depend on continued enrollment at our clinic accounts, the number of commercial AUGMENT treatment cycles our clinic accounts perform and the treatment prices charged. In addition, we plan to continue clinical trials of the OvaPrime treatment, and preclinical development of the OvaTure treatment. However, these activities are at early stages and may not ever yield positive data or treatments that will become commercially available to patients.

Risks Related to Research, Development and Commercialization of Our Potential Fertility Treatments

We have recently changed our corporate strategy to focus on the OvaPrime treatment and the OvaTure treatment, each of which is at a substantially earlier stage of development than the AUGMENT treatment. As a result, it will take a longer period of time for us to commercialize a product that will generate meaningful revenues.

In December 2016, we announced that we would slow the commercial expansion of the AUGMENT treatment, reassess our ongoing and planned clinical studies of AUGMENT, and undertake a corporate restructuring. These changes will enable us to extend our cash position into the first quarter of 2019 and increase our focus on the development of OvaPrime and OvaTure. Both of those treatments are at a substantially earlier stage of development than the AUGMENT treatment is. Accordingly, we expect that it will take a longer period of time for us to generate revenues from the sale of our treatments than it would have had we continued to pursue the commercial expansion of the AUGMENT treatment in accordance with our previous corporate strategy. The process of developing OvaTure and OvaPrime is uncertain and may never yield products that allow us to achieve revenue from their sale.

The science underlying the OvaTure treatment, the OvaPrime treatment and the AUGMENT treatment is based on recent discoveries, and as a result the programs are subject to a higher level of risk than programs based on longer extablished science. Additionally, our OvaPrime treatment and OvaTure treatment are at early stages of clinical and preclinical development, respectively, and may never yield treatments that can be successfully commercialized.

The OvaTure treatment, the OvaPrime treatment and the AUGMENT treatment are based on recent scientific discoveries relating to egg precursor cells. As a result, the programs are subject to a higher level of risk than programs based on longer established science.

We are continuing to develop the OvaTure treatment. While we have observed key criteria of developmental competence in EggPC cell-derived eggs in both human and bovine models, we will not know if we have successfully developed fertilizable, mature eggs until we have successfully fertilized them. We may find that there are important criteria for developmental competence that we are not observing, or that elements of the criteria for maturity that we have observed are inadequately developed for fertilization. While we have developed a limited number of human EggPC cell-derived eggs demonstrating criteria of maturity, we need to develop a robust and repeatable process to develop mature eggs. Further, we will require authorization from regulatory bodies outside of the United States to fertilize a human Egg PC cell-derived egg before we can test any eggs that we do mature. Fertilization studies may fail when we are able to start them. Therefore, there are significant aspects of the OvaTure treatment that will require additional innovation for us to continue its development. The recent nature of the scientific discoveries underlying the OvaTure treatment, the need for additional innovation and the absence of information about egg precursor cell technology from human clinical trials all increase the risks associated with this potential fertility treatment. In any event, we believe that it will be costly and time consuming to develop and successfully commercialize the OvaTure treatment.

The OvaPrime treatment has only recently been used in humans in our ongoing OvaPrime clinical study in the UAE and our ongoing OvaPrime clinical trial in Canada. The preclinical data we have generated for this treatments under development may not be replicated in humans.

We have limited patient experience with the AUGMENT treatment and our experience with the AUGMENT treatment to date may not be representative of what women will experience in the future. We continue to develop and optimize the AUGMENT treatment process and such modifications may lead to outcomes that are different from historical results. If results from clinics are unfavorable, the AUGMENT program could be delayed or abandoned. Further, international IVF clinics that we work with may determine not to provide or continue providing the AUGMENT treatment based on clinical efficacy, safety or commercial, logistic, regulatory or other reasons, or they may not expand their use of AUGMENT sufficiently for it to be a viable commercial offering.

We may not be able to successfully develop the OvaTure treatment, the OvaPrime treatment or other potential fertility treatments, and we may not successfully commercialize any of our treatments.

In December 2015 a study of OvaPrime was initiated in the UAE and in 2016, a clinical trial of OvaPrime was initiated in Canada. We plan to utilize the results of these studies during 2017 to assess the safety profile of OvaPrime and to help define the patient population most likely to derive the greatest benefit from treatment. The successful enrollment of patients in these clinical studies and their results, including whether and by how much the OvaPrime treatment boosts egg reserves, will impact our ability to further introduce and generate revenues from sales of the OvaPrime treatment. If the results are unfavorable, the OvaPrime treatment may not be viable or significant additional time and expense could be required before we are able to commercialize this potential fertility treatment. In December 2016, we announced that we are reassessing our ongoing and planned clinical studies of AUGMENT, including our planned multi-center clinical trial and the ongoing IVI-sponsored study in Valencia, Spain, and slowing our commercial expansion of AUGMENT.

Clinical studies of our fertility treatments are expensive, difficult to design and implement and uncertain as to outcome. Regulatory authorities and IRB or ethics committees regulate clinical trials and can suspend or terminate them for many reasons. Success in animal and preclinical studies does not ensure that studies in humans will be successful, and interim or preliminary findings do not necessarily predict final results. In addition, the timing of results from and completion of the studies will depend, in part, on our ability to enroll the studies on the timeline expected. Enrollment in any studies could be delayed for a number of reasons, including the unwillingness of patients to undergo, or physicians to prescribe, an additional surgical procedure in connection with IVF.

Patient enrollment is affected by other factors, including:

Our inability to enroll a sufficient number of patients for clinical trials for the OvaPrime treatment our other fertility treatments would result in significant delays or may require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our potential fertility treatments, which would cause the value of our company to decline and limit our ability to obtain additional financing. Further, our inability to ramp up use of the AUGMENT treatment by clinics offering the treatment commercially may delay commercial acceptance of the treatment.

OvaXon, our joint venture with Intrexon, is seeking to create new applications to prevent inherited disease for human and animal health that are based on a novel gene editing based technology, which makes it difficult to predict the time and cost of development and subsequently obtaining regulatory approval.

OvaXon, our joint venture with Intrexon, is developing new gene editing based applications to prevent inherited disease for human and animal health by leveraging Intrexon's synthetic biology technology platform and our technology relating to EggPC cells. OvaXon may experience difficulties in the future related to its gene editing platform, which could cause significant delays or unanticipated costs, and which OvaXon may not be able to solve. OvaXon may also experience delays in developing a sustainable, reproducible and scalable manufacturing process or transferring those processes to commercial partners, which may prevent OvaXon from completing studies or commercializing potential fertility treatments on a timely or profitable basis, if at all.

The clinical study requirements of the FDA, the EMA and other regulatory agencies and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the potential product candidate. The regulatory approval process for novel gene based fertility treatments such as those that OvaXon will pursue likely will be more expensive and take longer than for other, better known or extensively studied product candidates.

The FDA has never approved any gene therapy or gene editing technology for use in humans or other animals. Only one gene therapy product, UniQure's Glybera, which received an EU marketing authorization in 2012, has been approved in the Western world, which makes it difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for OvaXon's potential treatments.

OvaXon's technologies involve the use of synthetic biologically engineered products or synthetic biological technologies. Public perception about the safety and environmental hazards of, and ethical concerns over, genetically engineered products and processes could influence public acceptance of OvaXon's technologies, potential products and processes. If OvaXon is not able to overcome the ethical, legal and social concerns relating to synthetic biological engineering, any potential treatments it develops may not be accepted. These concerns could result in increased expenses or abandonment of any potential fertility treatments OvaXon develops.

Regulatory requirements governing gene and cell therapy products have evolved and may continue to change in the future. Further, most of the laws and regulations concerning synthetic biology relate to the end products produced using synthetic biology, but that may change. For example, the Presidential Commission for the Study of Bioethical Issues in December 2010 recommended that the federal government oversee, but not regulate, synthetic biology research. The Presidential Commission also recommended that the government lead an ongoing review of developments in the synthetic biology field and that the government conduct a reasonable risk assessment before the field release of synthetic organisms. Synthetic biology may become subject to additional government regulations as a result of the recommendations, which could require OvaXon to incur significant additional expenses in complying with these laws and regulations.

Regulatory review agencies, committees and advisory groups and any new requirements and guidelines they promulgate may lengthen the regulatory review process, require OvaXon to perform additional studies, increase OvaXon's development costs, which we share with Intrexon, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of these treatment candidates or lead to significant post-approval limitations or restrictions. As OvaXon advances its potential new treatments in human and animal health, it will be required to consult with these regulatory and advisory groups and comply with applicable requirements and guidelines. If OvaXon fails to do so, we may be required to

delay or discontinue development of its potential fertility treatments. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential fertility treatment to market could decrease our ability to generate sufficient revenue to maintain our business.

Development of our fertility treatments may not be successful. If we are unable to commercialize our fertility treatments or experience significant delays in doing so, our business will be materially harmed.

We intend to continue to invest a significant portion of our efforts and financial resources in the identification, development and commercialization of fertility treatments. Our ability to generate revenues will depend heavily on the successful development and eventual commercialization of our fertility treatments. For example, our plans to develop the OvaTure treatment will depend upon the regulatory pathways applicable to the OvaTure treatment in regions of the world that we target.

Regulatory authorities may conclude that certain of our fertility treatments qualify for a class of products exempt from pre-market review and approval. In some countries where we have introduced the AUGMENT treatment or may in the future plan to the AUGMENT treatment or the OvaPrime treatment, we believe that the AUGMENT treatment and OvaPrime treatment are not subject to regulatory requirements for extensive pre-market review and approval of an application for marketing authorization that apply to drugs, biologics, medicinal products and medical devices. However, applicable regulatory bodies may disagree with our view, and if they do, we and our clinic accounts may suffer significant delay or expense or may cease offering the treatment in such countries. In some jurisdictions where traditional pre-market approval such as that required for drugs, biologics, medicinal products and medical devices is not required for our treatments, we or our clinic accounts may be required to obtain special approval of or licenses from local institutions to study or use the AUGMENT treatment or OvaPrime treatment and/or license to offer such treatments. For example, in Spain, the IVI clinic commenced an investigator sponsored study of the AUGMENT treatment after receiving approval from the La Comisión Nacional de Reproducción Humana Asistida (CNRHA) and our clinic account in Japan has commenced a non-commercial preceptorship training program after receiving approval from the Japan Society of Obstetrics and Gynecology (JSOG). In some cases, there are no clear guidelines on what standards may apply to the AUGMENT treatment or OvaPrime treatment or what licenses or approvals may be required, and we therefore have engaged and will continue to engage in discussions with regulatory authorities in certain of the countries in which we have introduced or plan to introduce the AUGMENT treatment or OvaPrime treatment. If we or our clinic accounts are unable to obtain any required licenses or approvals in a particular country, if the application process takes longer than expected, or if additional licenses or approvals are required to commercialize the treatment on a large scale, then our introduction of the AUGMENT treatment or OvaPrime treatment in such countries may be delayed, we may incur additional expenses, and/or we may determine not to provide the treatment in such countries. Further, some or even all regulatory authorities may determine to classify the AUGMENT treatment, the OvaPrime treatment or our potential fertility treatments as drugs, biologics, medicinal products or medical devices. Any such regulation would mean, among other things, that we would have to conduct extensive clinical trials and would not be able to market such potential fertility treatments until we have received approval of an application for marketing authorization from the applicable regulatory authority. Other than as identified above, we have not applied for or received approval to market any fertility treatments from regulatory authorities in any jurisdiction. We have only limited experience in conducting preclinical testing and clinical trials and filing and supporting the applications necessary to gain marketing approvals and expect to rely on third parties, including contract research organizations, to assist us in this process.

If we are required to conduct traditional pre-market approval clinical trials in any of the countries where we seek to commercialize our potential fertility treatments, we would be subject to significant additional risk. Prior to initiating any necessary clinical trials of our potential fertility treatments that may be required in particular regions, we may need to submit clinical trial applications (such as an IND or foreign equivalent) to regulatory authorities, based on preclinical, animal and other tests. Upon submitting such an application, the regulatory authorities might determine that the risks involved in our potential fertility treatments are too great to justify proceeding with a clinical study and impose a partial or full clinical hold. They may require us to do significant and costly additional preclinical work before commencing our clinical trials or may not allow us to proceed with clinical trials at all. In addition, an ethics committee or IRB would be required to review and approve any clinical trial before we can commence that trial. The ethics committee or IRB responsible for reviewing any of our clinical trials may decline to grant approval for a variety of reasons, including that they do not believe that patient rights would adequately be protected. Our potential fertility treatments rely on new and complex technology that impacts human reproductive systems. Therefore, regulatory authorities and ethics committees may be especially cautious in reviewing and approving our clinical protocols for such potential fertility treatments.

Clinical testing is expensive, difficult to design and implement, can take many years to complete, and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not predict the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many

companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. The FDA, equivalent Foreign Regulatory Authorities or an IRB or ethics committee can suspend or terminate a clinical study at any time, for a number of reasons, including that continuing the study presents unreasonable risk to human subjects or that the rights of those subjects are not adequately protected.

We may experience numerous unforeseen events during, or as a result of, any clinical trials or studies if we choose to or are required to conduct them, which could delay or prevent our ability to achieve our stated goals for our fertility treatments or receive marketing approval for or commercialize our fertility treatments, including:

If we are unable to successfully complete any studies or clinical trials or other testing of our potential fertility treatments, if the results of these trials or tests are not positive or are insufficient to demonstrate safety or efficacy to applicable regulators, or if there are any safety concerns regarding our potential fertility treatments, we may:

If serious adverse side effects are identified during the development or commercialization of the OvaTure treatment, OvaPrime treatment, AUGMENT treatment, or any other potential fertility treatments or with any procedures with which these fertility treatments are used, we may need to abandon or limit our development of those fertility treatments, which could have a material adverse effect on our business, results of operations or financial condition.

None of the OvaTure treatment, the OvaPrime treatment, the AUGMENT treatment nor any of our potential fertility treatments has been proven effective and safe in humans through clinical trials. We have limited patient experience with the AUGMENT treatment and our experience with the AUGMENT treatment to date may not be representative of what women will experience in the future. Further, we continue to develop the AUGMENT treatment, and changes to the treatment could result in future experiences with the treatment differing from past experience. It is impossible to predict when or if any of our

fertility treatments will prove effective or safe in humans or, to the extent required, will receive marketing or other approval. If any of our current or potential fertility treatments are associated with undesirable side effects or have characteristics that are unexpected with respect to the mother or the child conceived using such treatment, we may need to abandon such treatments or limit their development and/or commercialization to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. In addition, if any of the procedures with which our potential fertility treatments are used is determined to be unsafe, we may be required to delay or abandon our fertility treatment development or commercialization. For example, we expect the AUGMENT treatment will be administered as part of the ICSI process and the OvaPrime treatment will be administered as part of the IVF process. To the extent physicians limit or abandon the use of ICSI, IVF or other procedures with which the AUGMENT treatment or the OvaPrime treatment is used, we may need to delay or abandon our development or commercialization of these treatments.

Even if we are able to continue the commercialization of the AUGMENT treatment or commercialize any of our other fertility treatments, they may fail to achieve the degree of market acceptance by physicians, patients and others in the medical community necessary for commercial success.

Even if we are able to continue the commercialization of the AUGMENT treatment or commercialize any of our potential fertility treatments, they may nonetheless fail to gain sufficient market acceptance by physicians, patients and others in the medical community. For example, doctors may continue to rely on current treatments, including fertility drugs and traditional IVF, which are well established in the medical community. In addition, the novel nature of the AUGMENT treatment, the OvaPrime treatment and the OvaTure treatment may affect market acceptance by physicians and patients. We have limited patient experience with the AUGMENT treatment and our experience with the AUGMENT treatment to date may not be representative of what women will experience in the future. Our ability to gain market acceptance of the AUGMENT treatment will depend on the experience women have with this treatment option over time. If our potential fertility treatments do not achieve an adequate level of acceptance, we may not generate significant treatment revenues and we may not become profitable. The degree of market acceptance of our fertility treatments, after receipt of any necessary licenses or approvals, will depend on a number of factors, including:

In addition, our ability to successfully commercialize our potential fertility treatments will depend on the continued use and acceptance of IVF, ICSI and fertility treatments generally. To the extent that the medical community or patient population determines that these procedures are unsafe or are otherwise not generally accepted, the market for our potential fertility treatments and, therefore, our business would be negatively affected.

If we are unable to establish sales and marketing capabilities or enter into additional agreements with third parties to sell and market our potential fertility treatments, we may not be successful in commercializing them.

To achieve commercial success for any potential fertility treatment, we must either develop a sales and marketing team or outsource these functions to third parties.

There are risks involved both with establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time consuming and could delay the introduction of any fertility treatment. If the commercial introduction or expansion of our treatments for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel. For example, we incurred restructuring costs in connection with the corporate restructuring that we announced in December 2016.

If we enter into arrangements with third parties to perform sales, marketing and distribution services, our treatment revenues or the profitability of these treatment revenues to us are likely to be lower than if we were to market and sell any potential fertility treatment ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our potential fertility treatments or may be unable to do so on terms that are favorable to us. We likely will have limited control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our potential fertility treatments effectively and in compliance with applicable laws.

We may not be successful in our efforts to identify or discover additional potential fertility treatments. If we do identify additional potential fertility treatments, we may expend our limited resources to pursue a particular potential fertility treatment and fail to capitalize on potential fertility treatments that may be more profitable or for which there is a greater likelihood of success.

An important element of our strategy is to identify and develop additional potential fertility treatments based on our EggPC cells technology. We may be unable to identify any such potential fertility treatments. If we do identify additional candidates, we may not advance such candidates into clinical development for a number of reasons, including:

Because we have limited financial and managerial resources, we focus on research programs and potential fertility treatments based on which candidates we believe have the highest likelihood of success and commercial value. As a result, we may forego or delay pursuit of opportunities with other potential fertility treatments that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial treatments or profitable market opportunities. Our spending on current and future research and development programs and potential fertility treatments may not yield any commercially viable treatments. For example, the programs we are considering relating to culture media and EggPC cells banking may not reach commercialization or, if commercialized, may not be successful. If we do not accurately evaluate the commercial potential or target market for a particular potential fertility treatment, we may relinquish valuable rights to potential fertility treatments through collaboration, licensing or other royalty arrangements when it would have been more advantageous for us to retain sole development and commercialization rights to such potential fertility treatment.

We may not be successful in obtaining necessary rights to additional technologies or potential fertility treatments, including from our scientific founders, for our development pipeline through acquisitions and in-licenses.

We may be unable to acquire or in-license additional technologies or potential fertility treatments from third parties, including our scientific founders, in order to grow our business. A number of more established companies may also pursue strategies to license or acquire potential fertility treatments that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.

For example, we continue to work collaboratively with our scientific founders. These scientists continue to be active in the field of infertility and may develop new potential fertility treatments or intellectual property based on their continued research relating to infertility. The rights to new inventions by our scientific founders generally belong to the hospitals and academic institutions at which they are employed and are not subject to license or other rights in our favor. In the event that our scientific founders, or other third party scientists or entities, develop potential fertility treatments or intellectual property that we wish to acquire or in-license, we may be unable to negotiate such acquisition or in-license. Our failure to reach an agreement for any applicable potential fertility treatment or intellectual property could result in a third party acquiring the related rights and thereby harm our business.

In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire relevant potential fertility treatments on terms that would allow us to make an appropriate return on our investment.

We expect competition for acquiring and in-licensing potential fertility treatments that are attractive to us may increase in the future, which may mean fewer suitable opportunities for us as well as higher acquisition or licensing costs. If we are unable to successfully obtain rights to suitable potential fertility treatments on reasonable terms, or at all, our business, financial condition and prospects for growth could suffer.

We face substantial competition, including from more established infertility treatments, such as traditional IVF, as well as advances in new artificial reproductive technologies, which may result in others discovering, developing or commercializing potential fertility treatments before or more successfully than we do.

There are a number of fertility treatments that are generally accepted in the medical and patient communities, including fertility drugs, IUI and IVF. Competition in the infertility market is largely based on pregnancy and live birth rates and side effects of treatment on patients. Accordingly, our success is highly dependent on our ability to develop potential fertility treatments that improve pregnancy and live birth rates and reduce risks and side effects, as compared to existing treatments. The ability of any potential fertility treatment that we successfully develop to reduce the overall costs associated with IVF also will be an important competitive factor.

Competitors may develop new infertility drugs, assisted reproductive technology, or ART, therapies, devices and techniques that could render obsolete our potential fertility treatments. There are a number of pharmaceutical companies, biotechnology companies, universities and research organizations actively engaged in research and development of potential fertility treatments. Like our treatments, some of these potential fertility treatments are designed to address the shortcomings of IVF. In particular, we are aware of a number of companies and laboratories that are currently developing potential fertility treatments intended to identify high quality embryos for use in IVF, a university study of the transfer of granulosa cell mitochondria into eggs, a university study using pronuclear transfer for improvement in IVF success rates and a university study of induced pluriopotent stem cells, or iPS, shows that iPS cells can be generated from somatic cells and programmed to become differentiated cells, which can include germ line cells such as oocytes. Novocellus Ltd. is developing an embryo viability test, using culture media, to aid in the selection of embryos used in IVF. FertiliTech and Auxogyn, Inc. are developing hardware and software that analyzes embryo development against cell division timing parameters to help identify the highest quality embryo within a group of embryos. If successfully developed, these potential fertility treatments could improve outcomes and alleviate some of the other shortcomings of traditional IVF, thereby decreasing the need for our potential fertility treatments. Fertility Focus, along with its strategic partner Norgenix, are developing a fertiloscope for the early diagnosis of, and immediate corrective surgery for, the physical causes of infertility. Molecular diagnostic companies like Reprogenetics are developing novel preimplantation genetic diagnosis and screening methods to detect chromosomal and genetic disorders of embryos prior to transfer back to the women. Testing embryos in this manner may increase the likelihood of pregnancy, reduce the chances of pregnancy loss, and improve the odds of delivery. At this time, we cannot evaluate how our potential fertility treatments, if successfully developed and commercialized, would compare technologically, clinically or commercially to any other potential fertility treatments being developed or to be marketed by competitors. There can be no assurance that we will be able to compete effectively. OvaXon is engaged in gene editing, which is a rapidly evolving field. OvaXon could potentially have competitors in both in the United States and internationally, including major multinational pharmaceutical companies, biotechnology companies and universities and other research institutions. Some of the pharmaceutical and biotechnology companies we expect OvaXon to compete with include GlaxoSmithKline plc, Sangamo BioSciences Inc., HemaQuest Pharmaceuticals, Inc., Merck & Co., Inc., and Novartis AG.

Our competitors may develop and commercialize new technologies before we do, allowing them to offer potential fertility treatments, services or solutions that are superior to those that we may offer or which establish market positions before the time, if any, at which we are able to bring potential fertility treatments to the market. Many of our competitors, either alone or with their strategic partners, have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of potential fertility treatments, obtaining FDA and other regulatory approvals of potential fertility treatments and the commercialization of those treatments. Accordingly, our competitors may be more successful than we may be in developing, commercializing and achieving widespread market acceptance. Our competitors' potential fertility treatments may be safer, more effective or more effectively marketed and sold than any treatment we may commercialize and may render our potential fertility treatments obsolete or non-competitive before we can recover the expenses of developing and commercializing any of our potential fertility treatments. We anticipate that we will face intense and increasing competition as new treatments enter the market and advanced technologies become available.

We could be subject to negative publicity, political action and additional regulation because of the nature of our potential fertility treatments. These factors could increase our development and commercialization costs.

Our potential fertility treatments are based on innovative science regarding eggs, embryos and fertilization, and in the case of our OvaXon joint venture, gene editing. These can be controversial subjects and, as a result, we could be subject to adverse publicity, political reaction and regulation, as well as changes to the laws and regulations affecting our potential fertility treatments. This may result in our incurring costs beyond what we anticipate in order to develop and commercialize our potential fertility treatments or may make it impossible to develop our potential fertility treatments at all. Bad publicity could also delay or impede our ability to obtain any necessary licenses or authorizations for us or our clinic accounts to introduce or continue to provide our treatments in countries where the criticism occurs. In addition, some states are considering adopting legislation defining when personhood begins. To the extent adopted, this legislation could limit, restrict or prohibit the use of IVF, which would have a negative effect on our ability to develop and sell our potential fertility treatments and, as a result, on our business.

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any potential fertility treatments that we may develop.

We face an inherent risk of product liability exposure related to the use of our fertility treatments in humans and will face an even greater risk as we continue the commercialization of the AUGMENT treatment, or if we successfully introduce the OvaPrime treatment or any other potential fertility treatment that we may develop, including potential fertility treatments developed by OvaXon. Product liability claims involving our activities may be made for significant amounts because our potential fertility treatments involve mothers and children. For example, it is possible that we will be subject to product liability claims that assert that our potential fertility treatments have caused birth defects in children or that such defects are inheritable. In light of the nature of our planned activities, these claims could be made many years into the future based on effects that were not observed or observable at the time of birth. If we cannot successfully defend ourselves against claims that our potential fertility treatments caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

We obtained product liability insurance coverage when we initiated our AUGMENT treatment study in the United States and introduced the AUGMENT treatment in select IVF centers outside of the United States. We will need to maintain product liability insurance coverage as we continue to offer the AUGMENT treatment outside of the United States, introduce the OvaPrime and OvaTure treatments, and/or conduct clinical trials for our current or potential fertility treatments. Such insurance is increasingly expensive and difficult to procure. In the future, such insurance may not be available to us at all or may only be available at a very high cost and, if available, may not be adequate to cover all liabilities that we may incur. In addition, we may need to increase our insurance coverage in connection with the commercialization of our current or potential fertility treatments. If we are not able to obtain and maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise, our business could be harmed, possibly materially.

Procedures such as IVF, as well as companies that manufacture and store cells and tissues, are the subject of standards and recommendations by national regulatory authorities and/or non-governmental bodies. Failure to comply with these standards could harm our commercial prospects or subject us to negative media attention or government sanctions.

Various countries where we are seeking or may seek to introduce our fertility treatments have standards set by regulatory authorities and/or non-governmental bodies that govern IVF procedures and the procurement, storage and processing of gametes and embryos for use in IVF procedures. In the UK, for example, the HFEA has adopted a Code of Practice, as well as supplementary guidance documents, with which licensed IVF clinics are obliged to comply. Similarly, the UK's Association of Clinical Embryologists has adopted a series of best practice guidelines for its members. Even where these standards are voluntary, if we, or third parties that we work with, including IVF clinics, fail to comply with these standards, our commercial prospects could be harmed because patients may prefer to use the services and potential fertility treatments of companies that meet these standards. Similarly, physicians or IVF clinics may be less likely to endorse or use procedures or potential fertility

treatments that fail to comply with such standards. In addition, failure to meet the standards could subject us to negative media attention.

Risks Related to Regulation of Our Potential Fertility Treatments and Other Regulatory Matters

Our potential plans to commercialize the AUGMENT treatment in certain regions outside of the United States, to introduce the OvaPrime treatment in selected regions outside of the United States, and to continue to define the clinical pathway for development of the OvaTure treatment depend upon these treatments meeting the requirements of a class of products or a type of practice or treatment exempt from pre-market review and approval of applications for marketing authorizations in such regions. Determinations by regulators in the markets we target that these treatments do not meet the requirements for a class of products exempt from pre-market review and approval could significantly delay or prevent commercialization of those products. Failure to obtain marketing approval in international regions, to the extent required, would prevent our potential fertility treatments from being marketed in such regions. Additionally, our plans to continue to define the clinical pathway for the OvaTure treatment will depend upon the regulatory pathway applicable in regions of the world that we target.

Our plans to continue the commercialization of the AUGMENT treatment outside of the United States, to introduce the OvaPrime treatment in select regions outside of the United States, and to continue to define the clinical pathway for development of the OvaTure treatment depend upon the treatments meeting the requirements of a class of products or a type of practice or treatment exempt from pre-market review and approval of applications for marketing authorizations in such regions. There can be no assurance that this will be the case in any particular jurisdiction, or that applicable Foreign Regulatory Authorities will agree with our determinations that our treatments meet these requirements. If the Foreign Regulatory Authorities in a given country disagree with our determination that our treatments are exempt from pre-market review and approval of applications for marketing authorizations required for drugs, biologics, medicinal products and medical devices, then we likely will be required to cease commercial marketing of that fertility treatment in that country, and may not be able to resume commercial marketing without first demonstrating safety and efficacy through clinical trials, submitting an application for marketing authorization, and receiving approval from the relevant regulatory authorities. In these circumstances, we are likely to be significantly delayed in our ability to commercialize our fertility treatments in such country, or we may elect to cease our commercialization activities in that country altogether. In 2012, we commenced a clinical study of the AUGMENT treatment in the United States relying on our conclusion that the AUGMENT treatment met the requirements for a section 361 HCT/P, and therefore did not require an IND. In September 2013, however, we received an "untitled" letter from the FDA questioning the status of the AUGMENT treatment as a section 361 HCT/P and advising us to file an IND for the AUGMENT treatment. As a result, we chose to suspend enrollment in our AUGMENT study in the United States. We are scheduled to speak with the FDA in the first half of 2017 as part of our ongoing exploration of potential entry into the U.S. market. However, we cannot provide any assurance as to the outcome of that meeting.

We will be unable to complete the development of OvaTure if we do not obtain authorization to fertilize an Egg PC cell-derived egg. Additionally, our plans to continue to define the clinical pathway for the OvaTure treatment will depend upon the regulatory pathway available in regions of the world that we target. From time to time, we engage in discussions regarding our fertility treatments with Foreign Regulatory Authorities in certain of the countries in which we have introduced or plan to introduce such fertility treatment or potential fertility treatment. We expect to have ongoing dialogue with these regulatory authorities. If any of our fertility treatments are subject to pre-market approval in a particular region, failure to obtain such required marketing approval in international regions would prevent us from marketing such fertility treatment in such regions, which could have a material adverse effect on our business, results of operations or financial condition.

Further, if Foreign Regulatory Authorities in a particular region determine that our fertility treatments do not meet the requirements of a class of products that is exempt from pre-market approval of applications for marketing authorization , then in order to market and sell our potential fertility treatments in that region, we or our third party collaborators may need to obtain separate marketing approvals and will need to comply with numerous and varying regulatory requirements, as described above. Additionally, study or license requirements vary among countries and may cause delays of or suspension of the approval process and can involve additional testing. The time required to obtain approval in foreign regions can be lengthy, and may differ substantially from region to region. The regulatory approval process outside the United States may be subject to risks like those associated with obtaining FDA approval. In addition, in many countries, a treatment must be approved for reimbursement before the treatment can be approved for sale in that country. Furthermore, some countries have restrictions particular to IVF and/or other fertility treatments, which may impose additional regulatory barriers for market entry for our potential fertility treatments. If required, we may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA for marketing in the United States does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA.

By way of example, regulators could determine that the OvaPrime treatment, the OvaTure treatment or the AUGMENT treatment, and/or any other potential fertility treatments, do not meet the requirements for a class of products exempt from pre-market review and approval. In that case, they could be regulated as medicinal products (including advanced therapy medicinal products), as medical devices or as human tissues and cells intended for human applications. For example, products regulated as advanced therapy medicinal products may only be placed on the market in the EU once they have been granted a marketing authorization by the European Commission. Securing a marketing authorization from the European Commission requires the submission of extensive preclinical and clinical data and supporting information, including information about the manufacturing process, to the EMA to establish the potential fertility treatment's safety, efficacy and quality. Following review of the marketing authorization application the EMA will issue an opinion, which the European Commission will take into account when deciding whether or not to grant a marketing authorization. If we are required to follow this regulatory pathway for the OvaPrime treatment, OvaTure treatment, AUGMENT treatment or our potential fertility treatments, this may significantly delay or preclude commercialization of these treatments. Similar determinations in other markets outside of the United States could have the same impact.

Even if regulators in regions outside of the United States, such as the EU, deem our treatments to be exempt from pre-market review and approval of an application for marketing authorization as required of drugs, biologics, medicinal products and medical devices, other regulatory requirements may nevertheless be applicable. For example, medical treatments and processes, such as IVF, may be regulated at the national level, which is the case in the EU. Such national regulations may restrict the extent to which the eggs used in IVF treatments may be manipulated and so may prevent us from commercializing our treatments in that country. Alternatively, such regulations may require the IVF facilities to be licensed by the national regulatory authority to perform specific IVF procedures or require us or our clinic accounts to obtain special approval of or licenses from national regulatory bodies to introduce our treatments in that country. For example, there are specific fertility regulatory authorities, such as the United Kingdom’s HFEA, which license IVF facilities and determine what procedures such establishments may perform. In other countries, the national health authority may delegate the review of a fertility treatment to an industry self-regulatory body, an institutional review board, or other body. For example, the approval of our clinic account’s application to use the AUGMENT treatment in Japan was made by the JSOG. Further, the investigator sponsored study of the AUGMENT with the IVI Group in Spain, was approved by the CNRHA. However, in some countries, there are no clear guidelines on what standards may apply to our treatments or what licenses or approvals may be required. While we have engaged and will continue to engage in discussions with regulatory authorities in certain of the countries in which we have introduced or plan to introduce our fertility treatments, if we or our clinic accounts are unable to obtain any required licenses or approvals in a particular country, if the application process takes longer than expected, or if additional licenses or approvals are required to commercialize the treatment on a large scale, then our introduction of our fertility treatments in such countries may be delayed, we may incur additional expenses, and we may determine not to provide the treatment in such countries.

It is unclear what regulatory pathway FDA will ultimately require for the AUGMENT treatment, the OvaPrime treatment, the OvaTure treatment or any other potential fertility treatments we may develop.

In 2012, we commenced a clinical study of the AUGMENT treatment in the United States. We did so without an IND on the basis of our conclusion that FDA would regulate the AUGMENT treatment as a section 361 HCT/P. On September 6, 2013, however, we received an "untitled" letter from the FDA questioning the status of the AUGMENT treatment as a section 361 HCT/P and advising us to file an IND.

We are scheduled to speak with the FDA in the first half of 2017 as part of our ongoing exploration of potential entry into the U.S. market for our fertility treatments. We believe that the AUGMENT treatment meets the regulatory definition of a section 361 HCT/P or is a procedure that can be performed as part of the practice of medicine - and in either case, is exempt from pre-market approval. The AUGMENT treatment involves isolation of mitochondria from egg precursor cells, and injection of those mitochondria into the same woman's egg, which we believe constitutes minimal manipulation of both the mitochondria and the egg. We believe the AUGMENT treatment involves only homologous use, does not combine the oocyte with an article that raises now safety concerns, and involves tissues for reproductive use. We therefore believe that the AUGMENT treatment meets all four of the criteria for a section 361 HCT/P set forth in FDA's regulation. If FDA ultimately agrees with our conclusions, the AUGMENT treatment will not be required to conduct clinical trials pursuant to an IND, nor will it be required to seek FDA pre-market review and approval of an NDA or BLA. However, both the AUGMENT treatment, the OvaPrime treatment and our potential fertility treatments constitute new technologies, the proper regulatory characterization of which likely constitute matters of first impression for FDA. Particularly because the AUGMENT treatment, the OvaPrime treatment and our potential fertility treatments are intended to result in the creation of human life, there can be no assurance that FDA will agree with our views as to the proper regulatory characterization of the AUGMENT treatment, the OvaPrime treatment or any of our potential fertility treatments. FDA may conclude that the AUGMENT treatment, the OvaPrime treatment and/or potential fertility treatments constitute drugs, biologics, or medical devices. If FDA makes such a determination for AUGMENT, the OvaPrime treatment or any of our potential fertility treatments, we may be required to conduct clinical trials under an IND (or investigational device exemption for a medical device) and seek FDA pre-market

review and approval of an NDA or BLA (or premarket approval for a medical device). In that event, we may abandon pursuing that potential fertility treatment in the United States, or suffer significant delays and expense seeking to obtain any necessary approval.

Even if the FDA regulates the AUGMENT treatment as a section 361 HCT/P, we must still generate adequate substantiation for any claims made in our marketing of the AUGMENT treatment before we commercialize it in the United States. Failure to establish such adequate substantiation in the opinion of federal or state authorities or equivalent Foreign Regulatory Authorities could substantially impair our ability to generate revenue.

If we ultimately do not need to submit the AUGMENT treatment to the FDA for preapproval due to the FDA regulating the treatment as a section 361 HCT/P, we still must generate adequate substantiation for claims we make in our marketing materials. Both the U.S. Federal Trade Commission (FTC) and the states retain jurisdiction over the marketing of products for which advertising and promotion are not regulated by the FDA, and require certain standards of evidence to support claims made in marketing materials. Many countries outside of the United States have similar regulatory authorities that regulate the marketing of products. We intend to generate such adequate substantiation for any claims we make about the AUGMENT treatment. If, however, after we commence marketing of the AUGMENT treatment in the United States, the FTC or one or more states or foreign authorities conclude that we lack adequate substantiation for our claims, we may be subject to significant penalties or may be forced to alter or cease our marketing of the AUGMENT treatment in one or more jurisdictions. Any of this could materially harm our business. In addition, if our promotion of the AUGMENT treatment suggests that the AUGMENT treatment is intended for uses that are not consistent with a section 361 HCT/P, the FDA or equivalent Foreign Regulatory Authorities might consider the potential fertility treatment to be a new drug or biologic. We will therefore be limited in the promotional claims that we could make about the AUGMENT treatment.

Procedures such as IVF, as well as companies that manufacture and store cells and tissues, are the subject of standards and recommendations by national non-governmental bodies. Failure to comply with these standards could harm our commercial prospects or subject us to government sanctions.

Various countries where we are seeking or may seek to introduce our fertility treatments have standards set by regulatory authorities and/or non-governmental bodies that govern IVF procedures and the procurement, storage and processing of gametes and embryos for use in IVF procedures. In the UK, for example, the HFEA has adopted a Code of Practice with which licensed IVF clinics are obliged to comply, as well as supplementary guidance documents. Similarly, the UK's Association of Clinical Embryologists has adopted a series of best practice guidelines for its members. Even where these standards are voluntary, if we, or third parties that we work with, including IVF clinics, fail to comply with these standards, our commercial prospects could be harmed because patients may prefer to use the services and potential fertility treatments of companies that meet these standards. Similarly, physicians or IVF clinics may be less likely to endorse or use procedures or potential fertility treatments that fail to comply with such standards.

Numerous states place restrictions on the operation of facilities and laboratories that recover, test, process, manufacture, store or dispose of certain cells and tissues. If we do not comply with such state regulations, as well as potential local regulations, we could be subject to significant sanctions.

Various states, including New York, California, Florida, Illinois, Maryland, Texas, Massachusetts and others, impose requirements on facilities and laboratories that recover, test, process, manufacture, store or dispose of certain cells and tissues. These requirements can have significant geographic reach. In Maryland, for example, the permit requirements applicable to tissue banks, including reproductive tissue banks, apply not only to tissue banks located in Maryland, but also those tissue banks located outside of the state that are represented or serviced in Maryland. In some cases, the requirements imposed by states, such as record keeping and testing requirements, may be more stringent than those imposed by the FDA. If we begin commercialization of our fertility treatments in the United States, we will have to comply with these state requirements. Failure to comply with these state requirements could subject us to significant sanctions.

We will not be able to sell any potential fertility treatment that is regulated as a medical device without obtaining and maintaining necessary regulatory clearances or approvals.

Some regions or countries may determine that certain of our potential fertility treatments, or certain aspects of such treatments, such as the innovative culture media solution that we are planning to develop, should be regulated as medical devices. In such cases, we will need to seek approval or clearance from the appropriate regulatory authorities in such countries.

In the EU, for example, we will need to complete a conformity assessment procedure, to demonstrate that our fertility treatments conform to the essential requirements set out in EU law, and only then may we apply the CE mark to the products, which would allow the products to be marketed throughout the EU. In other countries, such products may be subject to pre-market review and approval by regulatory authorities or some other form of regulatory clearance. We cannot guarantee that we will be able to complete the necessary conformity assessment procedures or obtain the necessary regulatory clearances of pre-

market approvals of these medical devices. In addition, any modifications to medical devices that we successfully bring to market, if any, may require new conformity assessment procedures, regulatory clearances or pre-market approvals. Marketing a medical device without the necessary CE mark, clearance or approval could result in a warning letter, fines, injunctions, product seizures or other civil or criminal penalties. Delays in our receipt of CE marking, regulatory clearance or pre-market approval will cause delays in our ability to sell our potential fertility treatments, which will have a negative effect on our ability to generate and grow revenues.

In addition to the challenges associated with obtaining any necessary marketing approvals in international jurisdictions, economic, political and other risks associated with foreign operations could adversely affect our international sales.

We are currently subject to risks associated with doing business internationally as a result of our commercialization of the AUGMENT treatment and the clinical development of the OvaPrime treatment outside of the United States. If we succeed in commercializing internationally, then our business will be subject to additional risks associated with doing business internationally. For example, our future results of operations could be harmed by a variety of factors, including:

We currently have a limited international infrastructure including, without limitation, sales, manufacturing and distribution capabilities. Establishing and expanding commercial activities and complying with laws in foreign jurisdictions may be costly and could disrupt our operations.

Even if our fertility treatments are not subject to pre-market review and approval, they may be subject to certain ongoing regulation in some regions. We could be subject to significant civil or criminal penalties if we fail to comply with these requirements, and we may be unable to commercialize our potential fertility treatments.

If regulatory authorities allow our fertility treatments to be offered to patients in any of the countries we seek to access, we will still be subject to numerous post-market requirements. Post-marketing requirements applicable to such products vary by region and by country. For example, in the United States, section 361 HCT/Ps are subject to several regulatory requirements, including those related to registration and listing, record keeping, labeling, cGTPs, donor eligibility and other activities. HCT/Ps that do not meet the definition of a section 361 HCT/P and, therefore, are approved via an NDA or BLA, are also subject to these and additional ongoing obligations. If we fail to comply with these requirements, or similar requirements in foreign jurisdictions, we could be subject to warning letters, product seizures, injunctions or civil and criminal penalties.

Moreover, even if the FDA or equivalent Foreign Regulatory Authorities allow our fertility treatments to be marketed without pre-market approval, the regulatory authorities could still seek to take enforcement action, which could include serving a written order that an HCT/P be recalled or destroyed, taking possession of the HCT/P, requiring cessation of manufacturing, or otherwise seeking to withdraw the potential fertility treatment from the market for a variety of reasons, including if the regulatory authority develops concerns regarding the safety of the potential fertility treatment or its manufacturing process

Any fertility treatment for which we are required to obtain marketing approval, and for which we obtain such marketing approval, will be subject to continuing regulation after approval. We may be subject to significant penalties if we fail to comply with these requirements.

Any potential fertility treatment, including any potential fertility treatment developed by our OvaXon joint venture, for which we obtain approval or clearance of an application for marketing authorization, will be subject to continuing regulation by the FDA or equivalent Foreign Regulatory Authorities. Specific requirements will vary by country and/or region. In general, however, such requirements will include those relating to, among other things, submission of safety and other post-marketing information and reports, registration and listing, manufacturing, packaging, quality control, storage, distribution, quality assurance and corresponding maintenance of records and documents, labeling, advertising and promotional activities, distribution of samples to physicians and recordkeeping. Even if marketing approval or clearance of a potential fertility

treatment is granted, the approval or clearance may be subject to limitations on the uses for which the potential fertility treatment may be marketed, be subject to restrictions on distribution or use, or contain requirements for costly post-marketing testing to further evaluate the safety or efficacy of the potential fertility treatment. The FDA and equivalent Foreign Regulatory Authorities closely regulate the post-approval marketing and promotion of drugs, biologics and medical devices to ensure such products are marketed only for the approved indications or cleared uses and in accordance with the provisions of the approved labeling. The FDA and equivalent Foreign Regulatory Authorities impose stringent restrictions on manufacturers' communications regarding off-label use and if we market our potential fertility treatments for uses other than for their approved indications, we may be subject to enforcement action.

In addition, later discovery of previously unknown problems with our potential fertility treatments, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:

It is unlikely that third party payors will cover or reimburse for the OvaPrime treatment, the OvaTure treatment, the AUGMENT treatment, or other future potential fertility treatments and services, and many patients may be unable to afford them.

Many third party payors, both in the United States and foreign countries, including national health services or government funded insurance programs as well as private payors, place significant restrictions on coverage and reimbursement for IVF and other ART procedures. Those restrictions may include limits on the types of procedures covered, limits on the number of procedures covered and overall annual or lifetime dollar limits on reimbursement for IVF and other ART procedures. As a result, we believe very few third party payors, either in the United States or outside the United States, will reimburse for the OvaPrime treatment, the OvaTure treatment, the AUGMENT treatment, or other future potential fertility treatments and services. Thus, it is likely that IVF clinics and physicians will be able to use the OvaPrime treatment, the OvaTure treatment, the AUGMENT treatment, and other future potential fertility treatments and services only if the patient can afford and is willing to pay out-of-pocket. The cost of the AUGMENT treatment, the OvaPrime treatment, the OvaTure treatment and other future potential fertility treatments and services may be beyond the means of many patients. This may limit the size of the market and prices charged for the AUGMENT treatment, the OvaPrime treatment, the OvaTure treatment or other future potential fertility treatments and services and, thereby, limit our future revenues.

Even in those limited situations in which government or private payors may cover the AUGMENT treatment, the OvaPrime treatment, the OvaTure treatment or other future potential fertility treatments and services, cost containment pressures may later cause these third party payors to adopt strategies designed to limit the amount of reimbursement paid to IVF clinics and physicians, including but not limited to the following:

Additionally, in those limited situations where ART procedures such as IVF are available to disabled patients of childbearing age enrolled in federal healthcare programs, such as Medicare, the covered services and potential fertility treatments may be subject to changes in coverage and reimbursement rules and procedures, including retroactive rate adjustments. These contingencies could even further decrease the range of potential fertility treatments and services covered by such programs or the reimbursement rates paid directly or indirectly for such potential fertility treatments and services. Such changes could further limit our ability to sell our potential fertility treatments, which may have a material adverse effect on our revenues.

In March 2010, Congress enacted healthcare reform legislation known as the Affordable Care Act. The Affordable Care Act has substantially changed the way that healthcare is financed by both governmental and private insurers and significantly affected the delivery and financing of healthcare in the United States. The Affordable Care Act contains provisions that, among other things, govern enrollment in federal healthcare programs, effect reimbursement changes, encourage use of comparative effectiveness research in healthcare decision making and enhance fraud and abuse requirements and enforcement. The Affordable Care Act imposes a significant annual fee on companies that manufacture or import branded prescription drug products, which could include our potential fertility treatments, if the FDA regulates those treatments as a biologic. The fee, which is not deductible for federal income tax purposes, is based on the manufacturer's market share of sales of branded drugs and biologics, excluding orphan drugs, to, or pursuant to coverage under, specified U.S. government programs. In addition, the law subjects most medical devices to a 2.3% excise tax, beginning on January 1, 2013. The implementation of the Affordable Care Act may have a material adverse effect on our results of operations and financial condition. However, it is also possible that the Affordable Care Act will be repealed and/or replaced, given recent changes in the federal administration in the United States. We are unable at this time to determine the outcome or impact on us of this uncertainty.

The reimbursement process for products and procedures outside the United States generally is subject to risks, like those associated with reimbursement in the United States, including the risk that it is unlikely that third party payors will cover or reimburse the AUGMENT treatment, the OvaPrime treatment, the OvaTure treatment or other future potential fertility treatments and services. Many national health services and third party payors in the EU already place coverage and reimbursement limits on ART procedures, including IVF, and may impose even greater limits in the future. In many EU member states medicinal products and medical devices are subject to formal pricing and reimbursement approvals before they can be reimbursed by national health services or government-funded insurance schemes. Reimbursement may be conditional on the agreement by the seller not to sell the product above a fixed price in that country, or the national authority may unilaterally establish a reimbursement price in connection with the inclusion of the product on a list of reimbursable products.

The likelihood that many third party payors will refuse to cover and reimburse for the AUGMENT treatment, the OvaPrime treatment, the OvaTure treatment and other future potential fertility treatments and services and that many patients will be unable to afford to pay for them out of pocket may reduce the demand for, or the price of, the AUGMENT treatment, the OvaPrime treatment, the OvaTure treatment and other future potential fertility treatments and services, which would have a material adverse effect on our revenues. Additional legislation or regulation relating to the healthcare industry or third party coverage and reimbursement may be enacted in the future, and could adversely affect the revenues generated from the sale of our potential fertility treatments.

Several states and certain foreign countries have enacted legislation that may hamper the ability of IVF clinics and physicians to pass through the cost of our potential fertility treatments to patients or third party payors.

Several states, including California and New York, and certain foreign countries require direct billing of laboratory or pathology services, prohibit physicians from marking up the cost of laboratory or pathology services when they pass these costs on to patients or other payors or require that physicians disclose to patients what they actually paid to obtain laboratory or pathology services. Additionally, the federal government has enacted regulations limiting the Medicare reimbursement available to physicians who contract out the technical component of certain laboratory and pathology procedures.

To the extent that the AUGMENT treatment, the OvaTure treatment, the OvaPrime treatment or other future potential fertility treatments or services are treated as laboratory or pathology services for purposes of reimbursement, these laws may make it difficult for us to market those potential fertility treatments and services to IVF clinics and physicians in some states

and may also require us to restructure our business model before we can expand into certain markets. To the extent that our IVF clinic and physician customer base anticipates seeking Medicare reimbursement, these laws may require a comprehensive restructuring of our business model, and therefore adversely impact our ability to market our potential fertility treatments. Any additional legislation or regulation in this area could also adversely affect our ability to market our potential fertility treatments.

Even though we anticipate very limited third party coverage and reimbursement for the OvaTure treatment, OvaPrime treatment, AUGMENT treatment and our future potential fertility treatments and services, our future arrangements with third party payors and IVF clinics and physicians may be subject to foreign, federal and state fraud and abuse laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

Even though we anticipate very limited third party coverage and reimbursement, including from federal healthcare programs, for any of our potential fertility treatments and services, our future arrangements with third party payors and IVF clinics and physicians may expose us to broadly applicable fraud and abuse laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute the AUGMENT treatment, the OvaPrime treatment, the OvaTure treatment and other future potential fertility treatments and services for which we obtain marketing approval. Restrictions under federal and state fraud and abuse laws and regulations that may be applicable to our business include the following:

Efforts to ensure that our business arrangements with third parties will comply with applicable fraud and abuse laws and regulations will involve substantial costs. It is possible that governmental authorities may conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the IVF clinics or physicians or other providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to similar criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Even the assertion of a violation under any of these provisions could have a material adverse effect on our financial condition and results of operations. Any such assertion would likely trigger an investigation of our business or executives that could cause us to incur substantial costs and result in significant liabilities or penalties, as well as damage to our reputation.

Laws and regulations governing international operations, including the FCPA, may preclude us from developing, manufacturing and selling certain potential fertility treatments outside of the United States and require us to develop and implement costly compliance programs.

We have active operations outside of the United States, and we must comply with numerous laws and regulations relating to our business operations in each jurisdiction in which we plan to operate. The creation and implementation of international business practices compliance programs is costly and such programs are difficult to enforce, particularly where reliance on third parties is required.

The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. The anti-bribery provisions of the FCPA are enforced primarily by the U.S. Department of Justice. The SEC is involved with enforcement of the books and records provisions of the FCPA.

Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the biotechnology industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical studies and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

The failure to comply with laws governing international business practices may result in substantial penalties. Violation of the FCPA can result in significant civil and criminal penalties. The SEC also may suspend or bar issuers from trading securities on United States exchanges for violations of the FCPA's accounting provisions.

We may have obligations under our contracts with IVF clinics and physicians or other healthcare providers to protect the privacy of patient health information.

In the course of performing our business, we will obtain, from time to time, confidential patient health information. For example, we may learn patient names and be exposed to confidential patient health information when we provide training on the AUGMENT treatment, the OvaPrime treatment, the OvaTure treatment and other future potential fertility treatments and services to the staff at IVF clinics and physicians' offices. United States federal and state laws protect the confidentiality of certain patient health information, in particular individually identifiable information, and restrict the use and disclosure of that information. At the federal level, the Department of Health and Human Services promulgated health information and privacy and security rules under HIPAA. At this time, we are not a HIPAA covered entity. However, our current and future business associate or other confidentiality agreements with covered entities contain commitments to protect the privacy and security of patients' health information and, in some instances, may require us to indemnify the covered entity for any claim, liability, damage, cost or expense arising out of or in connection with a breach of the agreement by us. If we were to violate one of these agreements, we could lose customers and be exposed to liability or our reputation and business could be harmed. In addition, the Health Information Technology for Economic and Clinical Health (HITECH) Act, enacted in February 2009, expands the HIPAA privacy and security rules, including imposing many of the requirements of those rules directly on business associates and making business associates directly subject to HIPAA civil and criminal enforcement provisions and associated penalties. We may be required to make costly system modifications to comply with the HIPAA privacy and security requirements. Our failure to comply may result in criminal and civil liability.

Other federal and state laws apply to the use and disclosure of health information, as well as certain financial information, which could affect the manner in which we conduct our business. Such laws are not necessarily preempted by HIPAA, in particular those laws that afford greater protection to the individual than does HIPAA or cover different subject matter. Such state laws typically have their own penalty provisions, which could be applied in the event of an unlawful action affecting health information.

In the member states of the EU and many other countries, we will be subject to similar or more stringent data privacy laws, such as those implementing the European Data Protection Directive 95/46/EC, that require us to protect all individually identifiable information and restrict the use, disclosure and onward transfer of that information. Such national laws typically have their own civil or criminal enforcement provisions and associated penalties. We may incur costs in complying with the applicable privacy and security requirements, which may include registration with the national data protection authorities.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.

Although we maintain workers' compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

Risks Related to the Manufacturing of Our Potential Fertility Treatments

We currently rely on on-site manufacturing at or near to the IVF clinics in which the AUGMENT treatment is offered. We may rely on third parties for the manufacture of our potential fertility treatments for development and commercialization to the extent that we do not rely on on-site manufacturing. This reliance on third parties may increase the risk of failing to provide manufacturing capacity to meet our potential fertility treatments at an acceptable cost. Lack of direct control of manufacturing capacity, costs and regulatory compliance could delay, prevent or impair our development and commercialization efforts.

We currently manufacture on-site or near to international IVF clinics where we have introduced commercial AUGMENT treatments and clinical programs for our OvaPrime treatment using our own equipment and employees. We entered into a master services agreement with a third party manufacturer to execute a technology transfer program to potentially provide services for the manufacture of the AUGMENT and OvaPrime treatments in the event that we decide to outsource our manufacturing operations for clinic or commercial activities. In addition, if we utilize centralized off-site manufacturing, we may also enter into similar master service agreements with other third party manufacturers to perform the processing steps for our AUGMENT and OvaPrime treatments. While we believe that our third party manufacturer has the capabilities to undertake the manufacturing activities in accordance with all applicable rules and regulations, there can be no assurance that they will be able to do so successfully or be capable of maintaining consistent quality standards. We seek to maintain high standards by working with high quality clinics, providing our own manufacturing equipment and personnel, and conducting regular training and quality audits, however there can be no assurance that such clinics will maintain consistent quality standards for activities outside of our control.

Reliance on third party manufacturers and laboratories entails additional risks, including:

We may wish to utilize third party manufacturers or third party collaborators for the manufacture of our other potential fertility treatments for preclinical testing, clinical trials and for commercial supply. We may be unable to establish any agreements with third party manufacturers or to do so on acceptable terms.

While we have identified and may continue to identify contractors with suitable regulatory experience and expertise, they may not be able to comply with cGTP regulations or similar regulatory requirements expected from global regulatory bodies in countries where we plan to offer our fertility treatments. Any performance failure on the part of our existing or future manufacturers and service providers could delay clinical development or marketing approval or adversely affect or impede commercial sales. Our failure, or the failure of our third party manufacturers and service providers, to comply with applicable regulations could also result in sanctions being imposed on us, including fines, injunctions, civil penalties, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our potential fertility treatments and harm our business and results of operations.

We may compete with other companies for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGTP and cGMP regulations and that might be capable of manufacturing for us. It is possible that some of these manufacturers have agreements with our competitors that limit or restrict their ability to contract with us, further narrowing the number of manufacturers that are available to us.

We do not currently have arrangements in place for redundant supply or a second contract manufacturing supplier for the AUGMENT treatment or the OvaPrime treatment. Although we believe that there are other potential alternative manufacturers who could manufacture our potential fertility treatments, we may incur added costs and delays in identifying and qualifying any such replacement.

Our potential future dependence upon others for the manufacture of our potential fertility treatments, were we could cease relying on on-site manufacturing, may adversely affect our future profit margins and our ability to commercialize the AUGMENT and OvaPrime treatments or any future potential fertility treatments that we seek to market on a timely and competitive basis.

In the future, we may build and equip a cGTP-compliant facility for the processing of the AUGMENT treatment. Constructing and equipping such a facility in compliance with regulatory requirements will be time consuming and expensive.

In the future, we may lease, build and equip a cGTP-compliant facility for the processing of the AUGMENT and OvaPrime treatment. We believe that such a facility may be important to our ability to meet demand for these on a cost-effective basis. The leasing, build-out and equipping of this facility will require substantial capital expenditures. In addition, it will be costly and time consuming to recruit necessary additional personnel for the operation out of the facility. We may continue to rely on on-site or third party manufacturing during the build-out of the facility and possibly retain third party manufacturing along with our own cGTP-compliant facility for a period of time to ensure uninterrupted service which will require additional capital.

Furthermore, we do not have experience running a manufacturing facility, which includes international tissue shipping and handling to meet local regulations. There is a risk that failure to maintain adequate quality controls and assurance for AUGMENT and OvaPrime processing facilities, associated support services and maintenance of equipment could impact the quality of our treatments, in terms of effectiveness and patient safety, which could lead to regulatory actions that could adversely impact commercialization of our fertility treatment business.

There is no assurance that we will secure necessary permits and license to build and equip a cGTP-compliant facility in the intended country, nor manufacture commercial products, nor do we currently have funding available for any of these

purposes. If we are unable to successfully construct and equip a commercial manufacturing facility in compliance with regulatory requirements, and hire additional necessary personnel appropriately, our revenues from the AUGMENT treatment, and the profitability of such revenues, may be adversely affected.

In addition, if treatment volumes projected to initiate the build of such a facility do not materialize, the cost burden on AUGMENT and OvaPrime treatments could be significantly increased and could negatively impact the profitability of the business.

Lack of coordination internally among our employees and externally with physicians, IVF clinics and third party suppliers and carriers could result in processing and manufacturing difficulties, regulatory enforcement actions, disruptions or delays and cause us to have insufficient resources to meet any of the AUGMENT treatment site's requirements or potential commercial requirements.

Providing the AUGMENT treatment to patients requires coordination internally among our employees and externally with physicians, IVF clinics and third party suppliers and carriers. For example, a patient's physician or clinical site will need to coordinate with us to ship a patient's ovarian biopsy sample to the cGTP-compliant facility responsible for the next steps in the AUGMENT treatment process and we will need to coordinate with them to ship treatment products, the patient's egg precursor cells or mitochondria, to the appropriate clinic or physician. Such coordination involves a number of risks that may lead to failures or delays in processing and providing our AUGMENT treatments, including:

If we are unable to coordinate appropriately, we may encounter delays or additional costs in achieving our clinical and commercialization objectives. We, or third parties, could face regulatory action as a result of the failure to comply with cGTPs or other applicable rules. Some or all of these risks may also be applicable to the OvaTure treatment and any other future potential fertility treatments.

We are reliant on single sourcing of materials and equipment for our potential fertility treatments which could put us at risk for continuity of supply in the event that any of our suppliers are unable to supply us in part or in full

We also are reliant on single sourcing for the majority of our raw materials, consumables and processing equipment, including but not limited to our proprietary antibody and Fluorescence-Activated Cell Sorting equipment. At this point in time we do not have the capacity or intent to source alternative or secondary suppliers of materials or processing equipment.

There is a risk that if we are required to find alternative suppliers, for whatever reason, this could delay supply of our fertility treatments for clinical or commercial purposes and could add an additional, unplanned financial burden on the company. Qualification of alternative suppliers could be a costly and timely process that would need to be driven through our Quality Management System to confirm and document that all the testing and validation activities are in place to ensure that like-for-like changes do not impact the performance and safety of our potential fertility treatments.

Risks Related to Our Dependence on Third Parties

We currently rely and will in the future rely on selected international IVF clinics to continue to conduct clinical trials, commercialize, gain experience and generate data on the AUGMENT treatment and the OvaPrime treatment. We will also rely on other third parties to conduct clinical trials for our fertility treatments. Such third parties may not perform satisfactorily, including failing to meet volume expectations, quality standards or deadlines for the completion of such studies or trials.

Our reliance on these third parties for providing our potential fertility treatments and for clinical development activities will reduce our control over these activities.

We will remain responsible for ensuring that the AUGMENT treatment and the OvaPrime treatment are introduced with consistent and high quality standards. Moreover, the FDA and equivalent Foreign Regulatory Authorities will require us to comply with GCPs with respect to any clinical trials for any of our potential fertility conducted in connection with a submission to the FDA or Foreign Regulatory Authorities, including an IND or equivalent application, and will require that we record and report clinical trial results to assure that data and reported results are credible and accurate and that the rights and safety are protected. We will also be required to register ongoing FDA-regulated clinical trials and post the results of completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

Our reliance on these third parties, including IVF clinics, for providing the AUGMENT treatment and OvaPrime treatment and conducting clinical development activities will reduce our control over these activities. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, provide our potential fertility treatments at all or as requested, conduct our clinical trials in accordance with regulatory requirements or our stated protocols or maintain consistent quality standards, in the case of contract manufacturing and clinics manufacturing our fertility treatments on site, we will not be able to obtain, or may be delayed in obtaining, regulatory approvals for our potential fertility treatments and will not be able to, or may be delayed in our efforts to, successfully commercialize our potential fertility treatments. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors, or have their on IVF practices and could devote more of their resources to such other entities or their own business at the expense of expending sufficient resources on our clinical development activities.

We expect to depend on collaborations with third parties, particularly Intrexon, for the development and commercialization of our potential fertility treatments. If those collaborations are not successful, we may not be able to capitalize on the market potential of these potential fertility treatments.

In December 2013, we established a collaboration with Intrexon to accelerate development of the OvaTure treatment, and entered into the OvaXon joint venture with Intrexon to create new applications to prevent inherited diseases for human and animal health. Our ability to reach our goals for the development of bovine and human OvaTure depend significantly upon Intrexon. Further, we may commercialize the AUGMENT treatment and the OvaPrime treatment ourselves in some markets and to collaborate with third parties to commercialize the AUGMENT treatment, the OvaPrime treatment and any future potential fertility treatments in other markets. In addition, we may seek partners for further development and commercialization of our other potential fertility treatments. These collaborations could take the form of license, distribution, sales representative, joint venture, sponsored research, co-promotion or other arrangements with pharmaceutical and biotechnology companies, other commercial entities and academic and other institutions.

In any such arrangements with third parties, we will likely have limited control over the amount and timing of resources that such collaborators dedicate to the development or commercialization of our potential fertility treatments. Collaboration agreements may not lead to development or commercialization of potential fertility treatments in the most efficient manner, or at all. Our ability to generate revenues from these arrangements will depend on, among other things, our collaborators' successful performance of the functions assigned to them in these arrangements.

Collaborations involving our potential fertility treatments would pose the following risks to us:

collaborator's strategic focus or available funding, or external factors such as an acquisition that diverts resources or creates competing priorities;

If we are not able to establish collaborations, we may have to alter our development and commercialization plans.

Our potential fertility treatment development programs and the potential commercialization of such treatments will require substantial additional cash to fund expenses. We may collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of some of our potential fertility treatments. For example, we currently intend to seek to collaborate with third parties to commercialize the AUGMENT treatment, the OvaPrime treatment and other potential fertility treatments we successfully develop.

We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator's resources and expertise, the terms and conditions of the proposed collaboration, and the proposed collaborator's evaluation of a number of factors. Those factors may include the design or results of our clinical trials, if any, the likelihood of approval by the FDA or similar regulatory authorities outside the United States or the availability of an exemption for the need or pre-marketing review or approval of our potential fertility treatment, the potential market for such potential fertility treatment, the costs and complexities of manufacturing and delivering the potential fertility treatment to patients, the potential and relative cost of competing fertility treatments, uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. The collaborator may also consider alternative potential fertility treatments or technologies for similar indications or conditions that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our potential fertility treatment. We may also be restricted under existing license agreements from entering into agreements on certain terms with potential collaborators. In addition, there have been a significant number of business combinations among pharmaceutical and biotechnology companies that have resulted in a reduced number of potential future collaborators. Collaborations are complex and time consuming to negotiate, document and manage. We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all.

If we are not able to obtain a collaborator for a particular program, we may have to curtail the development of such program or of one or more of our other development programs, delay the potential commercialization of such program, reduce the scope of any sales or marketing activities for the program or increase our expenditures and undertake development or commercialization activities for the program at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our potential fertility treatments or bring these potential fertility treatments to market and generate revenue.

Risks Related to Our Intellectual Property

If we fail to comply with our obligations under our intellectual property licenses, we could lose license rights that are important to our business.

We have an exclusive license from MGH with respect to the intellectual property that forms the basis of our business. The license under MGH-owned patent rights and know-how is for human female fertility, the treatment or prevention of inherited (including mitochondrial) diseases or defects in all animals, including humans, assisted and/or artificial reproductive technology in all non-human animals, and the artificial creation of food, research animals and/or animal products; and the license under the MGH and Harvard co-owned patent right is for ex-vivo human female fertility treatments. Our existing MGH

license agreement and another agreement granting rights impose, and we expect that future license agreements will impose, various obligations on us, including diligence, milestone payments, royalty payments, insurance and other obligations. For example, under our license agreement with MGH, we are required to use commercially reasonable efforts to develop and make available to the public licensed fertility treatments and to satisfy specified diligence milestones within specified timeframes. If we fail to comply with our obligations under this or other of our license agreements, our licensors may have the right to terminate our licenses, in which event we might not be able to market potential fertility treatments that are covered by these agreements, or to convert our licenses to non-exclusive licenses, which could materially adversely affect the value of the potential fertility treatments we developed under the license agreements. Termination of these license agreements or reduction or elimination of our licensed rights may result in our having to negotiate new or reinstated licenses with less favorable terms, or to cease commercialization of licensed technology and potential fertility treatments. This could materially adversely affect our business, particularly in the case of our license from MGH.

If we are unable to obtain and maintain patent protection for our technology and potential fertility treatments, or if our licensors are unable to obtain and maintain patent protection for the technology or potential fertility treatments that we license from them, our competitors could develop and commercialize technology and potential fertility treatments similar or identical to ours, and our ability to successfully commercialize our technology and potential fertility treatments may be adversely affected.

Our success depends in large part on our and our licensors' ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary technology and potential fertility treatments. We and our licensors have sought to protect our proprietary position by filing patent applications within the United States and abroad related to our novel technologies and potential fertility treatments that are important to our business. The process of obtaining patent protection is uncertain, and we and our licensors may not succeed in obtaining the patent protection for our novel technologies and potential fertility treatments that we seek. If we and our licensors are unable to obtain and maintain patent protection of sufficient scope for our technology and potential fertility treatments, our competitors could develop and commercialize technology and potential fertility treatments similar or identical to ours, and in that case our ability to successfully commercialize our technology and potential fertility treatments may be adversely affected. This risk is greater outside the United States where some aspects of our in-licensed intellectual property are not protected by patents. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States.

Moreover, under our license agreement with MGH, we do not have the right to control the preparation, filing and prosecution of the licensed patent applications, to defend the validity and enforceability of the licensed patents against challenges by third parties, or to maintain the licensed patents covering our technology or potential fertility treatments. This could also be the case under any other license agreements we enter into in the future. Therefore, we rely on MGH, and may rely on other licensors in the future, to file, defend and maintain patents that are important to our business. The failure of MGH or other licensors to successfully prosecute, defend and maintain these patents and patent applications in a manner consistent with the best interests of our business could adversely affect our ability to successfully commercialize our technology and potential fertility treatments.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our and our licensors' patent rights are highly uncertain. Our and our licensors' pending and future patent applications may not result in patents being issued which protect our technology or potential fertility treatments or that effectively prevent others from commercializing competitive technologies and potential fertility treatments. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.

Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we or our licensors were the first to file for patent protection of such inventions.

Under the America Invents Act enacted in September 2011, the United States moved to a first inventor to file system in March 2013. Outside the United States, the first to file a patent application is generally entitled to the patent. We may become involved in patent litigation or reexamination, post-grant review, opposition, derivation or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such litigation or proceeding could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or potential fertility treatments and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize potential fertility treatments without infringing third party patent rights.

Moreover, in recent years, the Supreme Court and the U.S. Court of Appeals for the Federal Circuit have rendered decisions in several patent cases such as Association for Molecular Pathology v. Myriad Genetics, Inc. (Myriad I) , BRCA1- & BRCA2-Based Hereditary Cancer Test Patent Litig., (Myriad II) , Mayo Collaborative Services v. Prometheus Laboratories, Inc. , and Alice Corporation Pty. Ltd. v. CLS Bank International , either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. For example, in the Myriad I case, the U.S. Supreme Court held that certain claims to naturally occurring substances are not patentable. We cannot predict how future decisions by the courts, the U.S. Congress, or the U.S. Patent and Trademark Office, USPTO, may impact the value of our patents. In addition to increasing uncertainty with regard to our and our licensors’ or collaborators’ ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce existing patents and patents that we may obtain in the future.

If the scope of the patent protection we or our licensors obtain is not sufficiently broad, we may not be able to prevent others from developing and commercializing technology and potential fertility treatments similar or identical to ours.

Our owned and licensed patents and any owned or licensed patent applications that issue as patents may not provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or potential fertility treatments in a non-infringing manner. The issuance of a patent is not conclusive as to its scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to use and commercialize, or to stop or prevent others from using or commercializing, similar or identical technology and potential fertility treatments, or limit the duration of the patent protection of our technology and potential fertility treatments. Given the amount of time required for the development, testing and regulatory review of new potential fertility treatments, patents protecting such candidates might expire before or shortly after such candidates are commercialized. For example, certain of the U.S. patents and patent applications that we exclusively license from MGH will expire in May 2025. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing potential fertility treatments similar or identical to ours.

We may be required to initiate lawsuits to protect or enforce our patents, which could be expensive, time consuming and unsuccessful.

Competitors may infringe our patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends upon our ability and the ability of our current and future collaborators to develop, manufacture, market and sell our potential fertility treatments and use our proprietary technologies without infringing the proprietary rights of third parties. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our potential fertility treatments and technology, including interference proceedings before the USPTO. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. If we are found to infringe a third party's intellectual property rights, we could be required to obtain a license from such third party to continue developing and marketing our potential fertility treatments and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or treatment. In addition, we could be found liable for monetary damages. A finding of infringement could prevent us from commercializing our potential fertility treatments or force us to cease some of our business operations, which could materially harm our business. Claims that we have wrongfully appropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

We may be subject to claims that our employees have wrongfully appropriated, used or disclosed intellectual property of their former employers.

Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies. Although we try to ensure that our employees do not appropriate or use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have appropriated, used or disclosed intellectual property, including information forming the basis of patents and patent applications, trade secrets or other proprietary information, of any such employee's former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel and our reputation may be harmed.

Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, such developments could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses, reduce the resources available for development activities and adversely affect our ability to raise additional funds. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to seeking patents for some of our technology and potential fertility treatments, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. The protection available for trade secrets is particularly important with respect to our process for manufacturing the AUGMENT treatment, to the OvaTure treatment, the OvaPrime treatment and to our potential fertility treatments, which will involve significant unpatented know-how. Any appropriation of our know-how, by competing contract manufacturers, collaborators or otherwise, could harm our business and we could suffer financial loss. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to such trade secrets, such as our employees, corporate collaborators, outside scientific collaborators, sponsored researchers, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

Risks Related to Employee Matters and Managing Growth

Our future success depends on our ability to retain our executive chair, to recruit a permanent chief executive officer, to retain other key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on Dr. Dipp, our executive chair, and Christophe Couturier, our chief financial officer, as well as the other principal members of our management and scientific teams. Following the change in our corporate strategy announced in December 2016, we are also engaged in a search for a permanent chief executive officer. Although we have entered into employment arrangements with Dr. Dipp and Mr. Couturier providing for certain benefits, including severance in the event of a termination without cause, these arrangements do not prevent them from terminating their employment with us at any time. We do not maintain "key person" insurance for any of our executives or other employees. The loss of the services of any of these persons could impede the achievement of our research, development and commercialization objectives.

Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors, including our scientific co-founders, may be employed by employers

other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.

We may encounter difficulties in managing our organizational changes and successfully adjusting our operations.

As we seek to transition from a company focused on in-licensing and research to a company capable of developing multiple potential fertility treatments and supporting commercial activities, we will need to expand our development, regulatory, manufacturing, marketing and sales capabilities or contract with third parties to provide these capabilities for us. As our operations expand, we expect that we will need to manage additional relationships with various strategic partners, suppliers and other third parties. Future growth will impose significant added responsibilities on members of management. Our future financial performance and our ability to commercialize our therapeutic candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to manage our development and commercialization efforts and hire, train and integrate additional management, administrative and sales and marketing personnel. We may not be able to accomplish these tasks, and our failure to accomplish any of them could prevent us from successfully growing our company.

We expect to expand our research and development and potentially in the future expand our sales and marketing capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

We expect to experience growth in the number of our employees and the scope of our operations, particularly in the areas of research and development, and potentially in the future, sales and marketing. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Our management team may need to divert a disproportionate amount of its attention away from its day-to-day activities and devote a substantial amount of time to managing these development activities. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel.

The physical expansion of our operations may also lead to significant costs and may divert our management and business development resources. If our management is unable to effectively manage our expected development and expansion, our expenses may increase more than expected, our ability to generate or increase our revenue could be reduced and we may not be able to implement our business plans. Our future financial performance and our ability to commercialize fertility treatments will depend, in part, on our ability to effectively manage the future development and expansion of our company. Accordingly, any inability to manage growth could delay the execution of our business plans or disrupt our operations.

A breakdown or breach of our information technology systems could subject us to liability or interrupt the operation of our business.

Many of our key business processes are facilitated by information technology systems. Information technology systems are potentially vulnerable to breakdown, malicious intrusion and random attack. Likewise, individuals authorized to access our information technology systems may pose a risk by exposing private or confidential data to unauthorized persons or to the public. While we believe that we have taken appropriate security measures to minimize these risks to our data and information technology systems, there can be no assurance that our efforts will prevent breakdowns or breaches in our systems that could adversely affect our business.

Risks Associated with Our Capital Stock

The market price of our common stock may be volatile and may fluctuate in a way that is disproportionate to our operating performance.

Even if an active trading market develops for our common stock, our stock price may experience substantial volatility as a result of a number of factors, including:

Many of these factors are beyond our control. The stock markets in general, and the market for pharmaceutical and biotechnological companies in particular, have historically experienced extreme price and volume fluctuations. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors could reduce the market price of our common stock, regardless of our actual operating performance.

We have never paid and do not intend to pay cash dividends.

We have never paid cash dividends on any of our capital stock and we currently intend to retain future earnings, if any, to fund the development and growth of our business. As a result, capital appreciation, if any, of our common stock will be our common stockholders' sole source of gain for the foreseeable future.

Provisions in our certificate of incorporation and by-laws and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our certificate of incorporation and by-laws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which our common stockholders might otherwise receive a premium price for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns 15% or more of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired 15% or more of our outstanding voting stock, unless the merger or combination is approved in a manner prescribed by the statute.

We will continue to incur increased costs as a result of operating as a public company and complying with the Sarbanes-Oxley Act, and our management continues to be required to devote substantial time to new compliance initiatives.

As a public reporting company, we have incurred significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002 and rules subsequently implemented by the SEC and the NASDAQ Global Market (NASDAQ) have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel have devoted a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and may make some other activities more time consuming and costly.

Pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, we are required to furnish a report by our management on our internal control over financial reporting. In addition, because we are no longer an emerging growth company status under the Jumpstart our Business Startups (JOBS) Act enacted in April 2012, we are required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting beginning with this Annual Report on Form 10-K. Our compliance with Section 404 of the Sarbanes-Oxley Act requires that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. If we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by NASDAQ, the SEC or other regulatory authorities, which would require additional financial and management resources.

Our ability to successfully implement our business plan and comply with Section 404 requires us to be able to prepare timely and accurate financial statements. We expect that we will need to continue to improve existing, and implement new operational and financial systems, procedures and controls to manage our business effectively. Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures or controls, may cause our operations to suffer and we may be unable to conclude that our internal control over financial reporting is effective and to obtain an unqualified report on internal controls from our auditors as required under Section 404 of the Sarbanes-Oxley Act. This, in turn, could have an adverse impact on trading prices for our common stock, and could adversely affect our ability to access the capital markets.

If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. We are required, under Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment must include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. A material weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting that results in more than a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. Section 404 also generally requires an attestation from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. Now that we no longer qualify as an emerging growth company as defined in the JOBS Act, we are no longer exempted from certain requirements, such as the independent registered public accounting firm attestation.

Our compliance with Section 404 requires that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge, and compile the system and

process documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the NASDAQ, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

Item 1B.     Unresolved Staff Comments

None.

Item 2.     Properties

We currently occupy approximately 25,200 square feet of office and laboratory space in Waltham, Massachusetts. This facility is under a lease agreement that expires in November 2020 that can be extended for an additional five-year term. We believe our facility is sufficient to meet our current needs and that suitable additional space will be available if and when needed. In December 2016, we executed a lease agreement for approximately 950 square feet of office space in Oxford, United Kingdom that is month-to-month and cancellable by either us or the landlord with one month's written notice.

We maintain office space in Tokyo, Japan under a lease agreement that expires in April 2017. We also maintain lab space in Toronto, Canada under a lease agreement that is cancellable by either us or the landlord with 60 days' written notice.

Item 3.     Legal Proceedings

On October 9, 2015, a purported class action lawsuit was filed in the Suffolk County Superior Court in the Commonwealth of Massachusetts against us, several of our officers and directors and certain of the underwriters from our January 2015 follow-on public offering of our common stock. The plaintiffs purport to represent those persons who purchased shares of our common stock pursuant or traceable to our January 2015 follow-on public offering. The plaintiffs allege, among other things, that the Company defendants made false and misleading statements and failed to disclose material information in the Company’s January 2015 Registration Statement and incorporated offering materials. Plaintiffs allege violations of Sections 11, 12 and 15 of the Securities Act of 1933, as amended, and seek, among other relief, unspecified compensatory damages, rescission, pre-and post-judgment interest and fees, costs and disbursements. On December 7, 2015, the OvaScience defendants filed a notice of removal with the Federal District Court for the District of Massachusetts.  On December 30, 2015, plaintiffs filed a motion to remand the action to the Superior Court. Oral argument on the motion to remand was held on February 19, 2016. On February 23, 2016, the District Court granted plaintiffs' motion to remand the action to the Superior Court. On February 26, 2016, a second putative class action suit was filed in the Suffolk County Superior Court in the Commonwealth of Massachusetts against the Company, several of our officers and directors and certain of the underwriters from the January 2015 follow-on public offering. The complaint is substantially similar to the complaint filed in October 2015. The two actions subsequently were consolidated and plaintiffs filed a First Amended Class Action Complaint on June 17, 2016. Defendants filed motions to dismiss the complaint. Those motions were denied by order dated December 22, 2016. The parties currently are engaged in discovery. We believe that the complaint is without merit and intend to defend against the litigation. There can be no assurance, however, that we will be successful. A resolution of this lawsuit adverse to the Company or the other defendants could have a material effect on our consolidated financial position and results of operations in the period in which the lawsuit is resolved. At present, we are unable to estimate potential losses, if any, related to the lawsuit.

On November 9, 2016, a purported shareholder derivative action was filed in the Business Litigation Session of the Suffolk County Superior Court in the Commonwealth of Massachusetts against certain of our present and former officers and directors alleging breaches of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement and corporate waste for purported actions related to the January 2015 follow-on public offering. On February 23, 2017, the court approved the parties’ joint stipulation to stay all proceedings in the action until further notice. The court has calendared a status conference for December 2017. We believe that the complaint is without merit and intend to defend against the litigation. There can be no assurance, however, that we will be successful. A resolution of this lawsuit adverse to the Company or the other defendants could have a material effect on our consolidated financial position and results of operations in the period in which the lawsuit is resolved. At present, we are unable to estimate potential losses, if any, related to the lawsuit.

We are not party to any other litigation in any court and management is not aware of any contemplated proceeding by any governmental authority against the Company.

Item 4.     Mine Safety Disclosures

Not Applicable.