2024 CVR Trends and Key Components in Life Sciences M&A Deals
Looking back at the first three quarters of 2024, we’ve seen some big moves in the life sciences M&A world. Some key areas of focus have been antibody-drug conjugates, CAR T-cell therapy, GLP-1s, and new autoimmune candidates. Out of the ten life sciences transactions this year valued at over $2 billion, seven were in biopharma, two were in medical devices, and one was in a CDMO.
In this ever-evolving sector, one term that stands out is contingent value rights (CVRs). These serve as the public company version of the earnout and are crucial in bridging the gap in valuation between buyers and sellers. This is especially important in an industry where success often hinges on factors like clinical trial results, regulatory approvals, and product launches.
In 2023, we saw a rise in the use of CVRs in life sciences M&A deals from 2020 to 2023. While the use of CVRs has continued into 2024, we’re seeing a slight decrease, potentially due to a smaller valuation gap or fewer sellers in need of immediate financial exits. In 2023, 38% of life sciences deals included a CVR, while in the first three quarters of 2024, that number dropped to 22%.
If the current trend continues, we could see a total of 36 life sciences M&A transactions in 2024, down 32% from 2023. Despite the drop in activity, CVRs were still present in a quarter of deals in 2024 and were discussed as a potential term in many more. Established players like AstraZeneca have embraced CVRs, with three acquisitions involving them in the past year, signaling a level of comfort with this practice.
This article builds on our previous analysis from 2023, looking at new trends and insights from life sciences deals from May 2023 to September 2024. It’s a valuable resource for understanding the evolving landscape of CVRs in this dynamic industry.
