Treasury Just Swept Biotech Into the COINS Act—

 Treasury Just Swept Biotech Into the COINS Act—But Big Pharma's China Deals Got a Hall Pass

 October 24, 2026 | 12-Minute Read**

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## The Short Version (For the Busy American)

The Treasury Department just made biotechnology a national security priority, and the decision reveals exactly how Washington thinks about the difference between building a drug and buying one.

On Thursday, Treasury released its proposed rules to implement the **COINS Act**—the Comprehensive Outbound Investment National Security Act—adding biotechnology to the list of sensitive technologies subject to outbound investment restrictions for the first time . The draft categorizes **"pharmaceutical compounds"** as a "prohibited technology," which would trigger an outright ban on certain U.S. investments in Chinese life sciences companies .

But here's the twist that has biotech boardrooms breathing a sigh of relief: **the proposed rule largely spares the in-licensing deals**—the multi-billion-dollar agreements where Western drugmakers pay cash, milestones, and royalties to license Chinese drug candidates for development outside China . Those deals are the lifeblood of the current biopharma business model.

**The punchline:** Treasury is drawing a line between **investing in Chinese companies** and **buying their drugs**. You can't own a piece of the Chinese biotech. But you can still license its asset. And that distinction tells you everything about what Washington is actually afraid of.

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## What the Proposed Rule Actually Does

Let me break down the structure, because the details matter enormously.

### The COINS Act Backdrop

The COINS Act was passed as part of the Fiscal Year 2026 National Defense Authorization Act. It gives Treasury the authority to regulate—and prohibit—U.S. outbound investments in "countries of concern" like China, Russia, Iran, North Korea, and Cuba .

Congress originally mandated restrictions on five sectors: **semiconductors, artificial intelligence, quantum computing, high-performance computing, and hypersonic systems**. But it also gave the Treasury Secretary the authority to add new sectors if they enable military, intelligence, surveillance, or cyber capabilities of a country of concern .

Treasury Secretary **Scott Bessent** exercised that authority to add **biotechnology** .

### The Prohibited Technology

The proposed rule defines "prohibited technologies" within biotech to include **pharmaceutical compounds and their delivery systems**—"small molecules, polymers, vaccines, blood and blood components, allergenics, cell and gene therapies, and monoclonal antibodies or other recombinant therapeutic proteins" .

It also covers **brain-computer interfaces, biomanufacturing equipment, genetic sequencing instruments, and automated discovery platforms** .

The concern, according to Treasury, is that these technologies are **dual-use**—they can serve legitimate medical purposes, but they could also assist biological weapons programs or create dangerous supply chain dependencies .

### The Transaction Types

Here's where the line gets drawn. The COINS Act targets **equity investments, debt financing convertible to equity, greenfield investments, joint ventures, and certain LP investments** .

What it **does not target**: **traditional asset licensing agreements** where a U.S. company pays cash and royalties for rights to a drug outside China .

That's the carve-out. And it's enormous.

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## The Human Touch: What This Means for Real Americans

Let me put this in terms that actually connect to your life.

### If You're a Patient

The drugs in your pharmacy cabinet increasingly come from Chinese research. By one analysis, **Chinese assets accounted for 91% of disclosed antibody-drug conjugate licensing value** and **62% of RNA licensing value** in the first half of 2026 .

Bristol Myers Squibb's potential **$15.2 billion deal** with Hengrui Pharma. Pfizer's **$10.5 billion collaboration** with Innovent Biologics. Merck's **$2.13 billion deal** with SciBrunch. These are the pipelines that will produce the cancer drugs, autoimmune treatments, and vaccines of the next decade .

The Treasury rule **doesn't stop those deals**. It stops American investors from **owning equity** in the Chinese companies that create them. The drug still comes. The ownership doesn't.

### If You're a Biotech Investor

Here's the uncomfortable part. The **NewCo model**—where a U.S. venture firm forms a new American startup around a licensed Chinese asset, with the Chinese licensor taking a minority equity stake—is now in a gray zone .

The rule's **anti-evasion clause** could subject these structures to scrutiny, even if the Chinese stake is below the 50% ownership threshold that would automatically trigger coverage . If you're an investor in one of these vehicles, the regulatory risk just went up.

### If You Work in Biotech

The **800 jobs** in Bombardier's aerospace expansion? Different story. But the biotech sector's job engine is tied to deal flow. If licensing continues, the jobs continue. If the anti-evasion clause chills the NewCo model, the startups that rely on it—and the scientists they employ—could feel it.

The Biotechnology Innovation Organization's CEO **John Crowley** warned: **"We cannot restrict our way to success. As Treasury considers comments on the proposed rule, we need to ensure that we do not have an overly broad approach that would create uncertainty for innovators and investors, and that may unintentionally risk weakening U.S. biotech competitiveness"** .

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## Frequently Asked Questions

### What exactly did Treasury propose?

Treasury released a Notice of Proposed Rulemaking to implement the COINS Act, adding **biotechnology** as a covered sector. The proposed rule categorizes **"pharmaceutical compounds"** as a prohibited technology, which would ban certain U.S. investments—equity stakes, joint ventures, convertible debt—in Chinese life sciences companies .

### Does this mean Big Pharma can't license Chinese drugs anymore?

**No.** The proposed rule **largely spares traditional in-licensing deals**—the cash-for-rights agreements that have driven most of the multi-billion-dollar deals between Western pharma and Chinese biotech. Those transactions fall outside the definition of covered national security transactions . Raymond James analyst Chris Meekins said after a first read: **"I think licensing is going to be largely OK"** .

### What deals ARE prohibited?

**Equity investments** in Chinese biotechs. **Joint ventures** with Chinese companies. **Greenfield investments** and corporate expansions. **Convertible debt** with certain rights. The Pfizer-3SBio deal structure—where Pfizer made a **$100 million equity investment** alongside the licensing agreement—would be prohibited . The NewCo model, where a Chinese licensor takes an equity stake in a new American startup, could face scrutiny under the anti-evasion clause .

### Why did Treasury add biotech but spare licensing?

Treasury framed the decision as a **national security balancing act**. The concern is that U.S. capital and know-how could help China develop **dual-use technologies**—biological agents that could be weaponized, or brain-computer interfaces used for surveillance . But licensing a drug for development outside China doesn't transfer equity or control. It's a commercial transaction, not an investment. Treasury is targeting **ownership**, not **commerce**.

### What did Congress want?

Some lawmakers wanted **much broader restrictions**. Rep. John Moolenaar and Sen. Tom Cotton urged Treasury to cover biotechnology and give "particular consideration" to **licensing of pharmaceutical IP** . A separate bill, the **Biotech Investment National Security Act (BINSA)**, would explicitly expand the COINS Act to cover **licensing deals and joint ventures** . That bill has not passed.

### What happens next?

The proposed rule is subject to **public comment until December 7, 2026**. Treasury must issue final regulations by **March 13, 2027** . The final rule could change—particularly if the White House intervenes or if Congress passes BINSA. The anti-evasion clause and the definition of "joint venture" are likely to face intense lobbying .

### How does this affect Chinese biotech stocks?

Hong Kong-listed biotechs **rallied in September** when Reuters first reported that Treasury would spare most licensing deals. The Hang Seng Biotech Index rose **more than 5%** on September 21 . The final rule, if it holds to the reported approach, could be read as a **relief** for the licensing model—even as it restricts equity investment.

### Should I be worried about my biotech stocks?

I can't give personalized investment advice. What I can tell you is that **the licensing business model survives** under this proposed rule. The equity investment model—particularly the NewCo structure—faces new uncertainty. If you own U.S. biotech companies that rely on Chinese assets, the pipeline is intact. If you own venture funds that invest directly in Chinese biotech, the rules just got tighter.

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## The Path Forward: What to Watch

### The Comment Period (Until December 7)

Industry groups, law firms, and companies will submit comments. The **anti-evasion clause**, the **definition of "joint venture"**, and the **scope of "pharmaceutical compounds"** are the key battlegrounds. Watch for whether Treasury narrows or broadens the rule in response.

### The Final Rule (March 13, 2027)

This is the statutory deadline. The final rule will set the effective date. If it looks like the proposed rule, licensing survives. If Congress passes BINSA first, licensing could be swept in.

### The NewCo Model

This is the structure most at risk. If Treasury's anti-evasion clause is interpreted broadly, the NewCo model—where U.S. venture firms build startups around Chinese assets—could face regulatory uncertainty. Watch for guidance on how the rule applies to these structures .

### The Trump-Xi Dynamic

The rule was released after the late-September Trump-Xi summit, which ended with a **two-month extension of the trade truce** to January 10 . If the truce holds and relations stabilize, Treasury may keep the rule narrow. If tensions escalate, the rule could tighten.

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## Conclusion: The Line Between Owning and Buying

Here's what I want you to take away from Treasury's proposed rule.

The U.S. government has decided that **biotechnology is a national security technology**. It's now in the same category as semiconductors, AI, and quantum computing. That's a profound shift—and it signals that Washington sees the life sciences as a strategic battleground, not just a commercial one.

But the rule draws a careful line. **You can't own a piece of the Chinese biotech that discovers the drug. But you can still buy the drug.** The licensing model—the engine of the current biopharma boom—survives.

That distinction reflects a pragmatic recognition: **America needs Chinese innovation**. The pipelines of Bristol Myers, Pfizer, and Merck depend on it. Shutting down licensing would hurt American patients and American pharma companies. Shutting down equity investment is a narrower, more targeted restriction that addresses national security concerns without strangling the drug pipeline.

For biotech investors, the message is nuanced. The **licensing trade is safe**. The **equity trade is not**. And the NewCo model—the clever structure that blurred the line—is now in the crosshairs.

Treasury drew a line. The industry will spend the next six months arguing about where exactly it falls.

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## Disclaimer

This article is for informational purposes only and does not constitute financial advice, investment advice, or legal advice. The author is not a licensed financial advisor or attorney. All investments involve risk, including the potential loss of principal. Readers should conduct their own research and consult with a qualified professional before making any financial or legal decisions. Data and figures cited are accurate as of the date of publication but may change. The proposed rule is subject to public comment and may be revised before final implementation.

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