Treasury Draft Rules Target Chinese Biotech Equity While Sparing Licensing Deals

Key points

• The draft rules classify 'pharmaceutical compounds' as a prohibited technology, covering small molecules, vaccines, and gene therapies.
• Traditional asset licensing agreements, where Western drugmakers pay cash and royalties for ex-China rights, fall outside the scope of covered transactions.
• The rules would prevent U.S. venture capital firms from investing in Chinese biotechs and impact deals involving equity components, such as Pfizer's partnership with 3SBio.
• The Treasury is seeking comments until December 7, 2026, and is asking for feedback on whether to narrow the scope of 'pharmaceutical compounds' to focus on advanced technologies.
• Industry groups like BIO and MassBio warn that overly broad restrictions could weaken U.S. biotech competitiveness and hinder access to promising scientific discoveries.

Background

The COINS Act was enacted as part of the fiscal year 2026 national defense bill, giving the Treasury the power to scrutinize or prohibit American investments in sensitive foreign sectors. Earlier in 2026, China drafted export rules to block foreign acquisitions of core biotech platforms, but those rules also excluded common out-licensing agreements. The current draft rules build on these efforts, aiming to prevent adversaries from leveraging U.S. capital for military or surveillance capabilities while attempting to preserve legitimate business conduct.

How outlets are covering it

Endpoints News highlights the potential threat to broad China collaborations, while Fierce Biotech emphasizes that the rules spare regular in-licensing deals and fee-for-service drug R&D collaborations. Fierce Biotech notes that the proposed rule largely spares the regular in-licensing deals that have driven the majority of multi-billion-dollar deals between Western biopharma companies and their Chinese counterparts. In contrast, Endpoints News focuses on the broader implications for U.S. biopharmas looking to tap into China's biotech innovations. Both sources agree that the rules would cause additional headaches for U.S. biopharmas, but Fierce Biotech provides more detail on the specific types of transactions that would be affected, such as equity investments and joint ventures.

Why it matters

The draft rules could significantly impact the flow of U.S. capital into Chinese biotech firms, potentially limiting access to innovative drug candidates and technologies. However, by sparing traditional licensing deals, the rules may preserve a key avenue for collaboration between Western and Chinese pharmaceutical companies. The outcome of the public comment period will determine whether the rules are narrowed to focus on advanced technologies or remain broad, which could have lasting implications for U.S. biotech competitiveness and global innovation.

What to watch

The Treasury Department is seeking comments until December 7, 2026. Industry groups are expected to submit feedback on the scope of the rules, particularly regarding the definition of 'pharmaceutical compounds' and the treatment of joint ventures. The final rules could be enacted in late 2026 or early 2027, depending on the outcome of the comment period and any subsequent revisions.