What a Contingent Value Right (CVR) Pays in a Merger
Your buyout came with an extra line: one CVR per share. How contingent value rights work, why many are not tradable, and what happened in deals from Celgene to Akero.
A contingent value right (CVR) is a promise, given to target shareholders in a merger, of an extra cash payment per share if a named milestone is reached by a deadline, such as an FDA approval or a sales target. If the milestone is missed, the CVR expires worthless. Its terms are set in a CVR agreement, attached to the merger agreement and summarized in the 8-K, proxy statement or tender offer documents.
CVRs are most common in biotech and pharma deals, where buyer and seller disagree on what an unapproved drug is worth. The buyer pays a fixed amount at closing and defers part of the price until the uncertainty is resolved.
How does a CVR work in a merger?
At closing, each target share is converted into the upfront consideration plus one CVR. The CVR agreement, usually with a bank or trust company acting as rights agent, defines:
- The milestone: the event that triggers payment, often described in precise regulatory language.
- The amount: a fixed dollar amount per CVR, or several amounts for several milestones.
- The deadline: the date by which the milestone must occur.
- The buyer’s effort obligation: typically “commercially reasonable efforts” or “diligent efforts” to reach the milestone, a phrase that is often at the center of later disputes.
- Payment mechanics: how quickly the rights agent pays holders after the milestone is achieved.
Holders of untendered shares in a cash merger receive the same CVR as holders who tendered. For how shares are converted at closing, see our guide to what happens to your shares when a company is bought.
What is the difference between tradable and non-tradable CVRs?
A tradable CVR is registered with the SEC and listed, so holders can sell it before the milestone is decided. A non-tradable CVR stays with the holder of record and can be transferred only in narrow cases, such as by will or operation of law.
| Tradable CVR | Non-tradable CVR | |
|---|---|---|
| Registration | Registered with the SEC | Not registered |
| Can you sell it? | Yes, on an exchange, until the milestone is decided | No, except in limited cases |
| Price information | Market price shows what investors expect | None; you hold it to the end |
| Where it appears | As a separate position in your brokerage account | Sometimes as a zero-value or “contra” position, sometimes not at all until paid |
| How common | Less common | Common in recent biotech deals |
What happens when the milestone is missed?
The CVR terminates and pays nothing. The best-known case is Bristol-Myers Squibb’s purchase of Celgene, completed in November 2019, in which each Celgene share received cash, BMS stock and one tradable CVR that would pay $9.00 if three FDA approvals came on time. One deadline required approval of the cell therapy liso-cel by December 31, 2020. The FDA had not acted by then, and BMS reported in an 8-K on January 1, 2021 that the CVR agreement had terminated automatically and the CVRs would no longer trade on the NYSE.
The trustee for the CVRs later sued BMS, arguing it had not used the required diligent efforts. That is the main recourse when holders believe a buyer did not try hard enough, and it is handled by the rights agent or holder representatives under the agreement, not by individual holders.
What does a recent biotech CVR look like?
Novo Nordisk’s agreement to buy Akero Therapeutics, announced October 9, 2025, is a typical non-tradable example. According to Akero’s 8-K describing the merger agreement, each share was to receive $54.00 in cash plus one CVR paying $6.00 if Novo or an affiliate received FDA approval of efruxifermin for compensated cirrhosis due to MASH before June 30, 2031. The filing states that the CVRs will not be listed or registered and are not transferable except in limited circumstances.
The value of a CVR can move long after closing. Alkermes, which completed its acquisition of Avadel Pharmaceuticals on February 12, 2026, raised its estimate of the CVR liability by $26.4 million in the second quarter of 2026 after positive phase 3 results for the drug tied to the milestone, according to its July 28, 2026 earnings release. A higher accounting estimate does not guarantee payment; the milestone still has to be met.
When and how do CVR holders get paid?
If the milestone is achieved, the buyer notifies the rights agent, and payment goes to holders within the period the agreement sets. For shares held at a broker, the cash arrives in the account that held the shares at closing, even if you have since moved your other holdings. If your old account is closed, contact the broker; unclaimed payments can eventually go to state unclaimed property programs.
- Find the CVR agreement as an exhibit to the merger agreement or the closing 8-K on EDGAR.
- Note the milestone wording and the deadline exactly as written.
- Follow the buyer’s press releases and periodic reports; buyers usually announce when a CVR milestone is met or missed.
- Keep the account where the shares were held open, or keep your broker’s contact details, until the CVR is resolved.
How are CVRs taxed?
The tax treatment is not settled in one rule. Buyers often take the position that receiving the CVR is part of the sale price, with payments treated as additional proceeds when received, and the proxy or offer document includes a tax section describing the approach. Because the answer can affect the timing and character of your gain, check that section and ask a tax professional. Our guide to how cash and stock mergers are taxed covers the main deal itself.
Bottom line
Treat the upfront price as what the deal pays and the CVR as a separate bet with its own date. The CVR agreement’s deadline and milestone wording matter more than any headline about the drug: a later approval, or an approval for a slightly different use, can leave the CVR unpaid, as the Celgene holders learned.
FAQ
Can I sell a non-tradable CVR?
Generally no. Transfer is allowed only in narrow cases the agreement lists, such as by will, by operation of law or to certain trusts.
Why does my brokerage account show the CVR at zero?
Non-tradable CVRs have no market price, so many brokers show them with no value until a payment is made or the right expires.
Does the CVR affect appraisal rights?
The CVR is part of the merger consideration. Holders who seek appraisal rights in a Delaware cash merger give up the deal consideration, including the CVR, in exchange for the court’s valuation.
How often are CVR milestones met?
Outcomes vary widely by deal and milestone type, and there is no single official count. Each deal’s results are disclosed by the buyer, so the filings are the source for any particular CVR.
