Article originally published in The Lawyer on October 14, 2010

Despite global economic conditions, deal-making by large pharmaceutical companies has remained relatively buoyant, say Daniel Pavin, Grant Castle and Alexandra Pygall.

Acquisitions in the pharmaceuticals sector are being driven by factors such as the need to replenish shrinking product pipelines, the need to maintain revenues as patents on top-selling products expire, and the strategic diversification of business lines and expansion into emerging markets.

Two general trends that may be observed, each of which is largely independent of underlying deal imperatives, are that buyers are becoming more risk averse and deal terms are becoming more complex. An illustration of the latter being driven by the former is the increasing use in life sciences M&A deals of structured or deferred consideration, payable only on the achievement of certain events or performance targets. Common terminology used in such acquisitions is ’earn-outs’, ’contingent value rights’ (CVRs) and ’contingent payment rights’.

Without a crystal ball, the outcome of future events crucial to the value of a target often cannot be determined, but the seller wants reward for its investment and the buyer does not want to pay over the odds. Contingent consideration structures based around milestones in the life of the target’s key products can help to bridge the ‘expectation gap’.

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Photo of Grant Castle Grant Castle

Grant Castle is a partner in the London office practicing in the areas of life sciences regulatory law, with an emphasis on pharmaceutical and medical device regulation.

His advice on general regulatory matters includes: adverse event and other reporting obligations, manufacturing controls, labeling…

Grant Castle is a partner in the London office practicing in the areas of life sciences regulatory law, with an emphasis on pharmaceutical and medical device regulation.

His advice on general regulatory matters includes: adverse event and other reporting obligations, manufacturing controls, labeling and promotion, and product life cycle management.  He has also advised extensively on EC and national laws governing clinical research, data protection, and the regulatory status of borderline products.

He has developed considerable expertise in coordinating regulatory projects covering jurisdictions outside of Europe, including Canada, South America, Eastern Europe, Russia, Africa, the Middle East, Japan, and Australia.  His transactional work includes advice on regulatory aspects of mergers and acquisitions, licensing, and collaborative arrangements.

Grant is a visiting lecturer at the University of Surrey, on a course leading to a Master of Science in Pharmaceutical Medicine/Clinical Pharmacology; Cardiff University, on a course leading to a Master of Science/Diploma in Clinical Research and on the Postgraduate Course in Pharmaceutical Medicine; and, Cranfield University, on a course leading to Master of Science, Postgraduate Diploma, and Postgraduate Certificate in Medical Technology Regulatory Affairs.  Grant is recognized by Chambers UK, Life Sciences as “excellent,” “a knowledgeable lawyer with a strong presence in the industry,” who provides “absolutely first-rate regulatory advice,” according to sources, who also describe him as “one of the key players” in that area,” whilst Chambers Global sources report that “he worked in the sector for many years, and has a thorough understanding of how the industry ticks.”  He is praised by clients for his “absolutely first-rate” European regulatory practice.  Legal 500 UK notes that he is “‘highly competent in understanding legal and technical biological issues.”