The COINS Act Proposal and the Future of US China Biotech Deals

Treasury’s October 22, 2026 proposal to expand the Outbound Investment Security Program would bring biotechnology into a framework that prohibits certain U.S. investments involving countries of concern. For U.S.–China biotech dealmaking, the central distinction is between acquiring rights to a drug and investing in the business or venture that develops it. Conventional licensing may remain available, while some equity investments and NewCo structures could become commercially unworkable.

The proposed regulations implement the Comprehensive Outbound Investment National Security Act, commonly known as the COINS Act. As of October 25, 2026, the biotech expansion is a proposal, not an operative prohibition. Comments are due December 7, 2026, and a later final rule will set its effective date. Existing regulations under 31 C.F.R. Part 850 continue to apply in the meantime.

A broad proposal with consequences beyond specialist technologies

Treasury proposes prohibitions covering specified biotechnology activities, including certain bio-derived compounds and materials, biomanufacturing equipment, sequencing technology, bioinformatics, and laboratory automation. The pharmaceutical provision reaches the development, engineering, or use of biological systems or their components to modify, enhance, produce, or control pharmaceutical compounds and delivery mechanisms. Listed examples include small molecules, vaccines, cell and gene therapies, and monoclonal antibodies.

That wording warrants a technical assessment of the target’s activities. It does not mean that every company associated with a pharmaceutical product automatically falls within the prohibition. Treasury expressly asks whether pharmaceutical compounds should be scoped more precisely to focus on advanced or frontier technologies, leaving an important issue open for industry comment.

The commercial concern is nevertheless substantial. If adopted broadly, the proposal could interrupt financing models through which U.S. capital supports Chinese drug discovery and development. Companies relying on those models should consider the effect on future financing rounds, collaboration structures, and exit plans, rather than assessing only whether today’s transaction can close.

Licensing and IP purchases remain distinct from equity investment

The proposed framework targets defined categories of transactions. These include equity and contingent equity acquisitions, certain debt with equity-like rights, joint ventures, greenfield investment, corporate expansion, and certain fund investments. It does not impose a general ban on commercial payments to Chinese biotechnology companies.

A conventional licence under which a U.S. company receives drug-development and commercialization rights in exchange for cash, milestones, and sales royalties may therefore remain outside the core investment restrictions. This assessment assumes the arrangement does not also create a covered investment or joint venture. A sales royalty alone should not be equated with joint ownership of an enterprise, but the full allocation of contributions, rights, profits, and losses matters.

A standalone purchase of patents, know-how, or other IP rights for development outside China may likewise fall outside the covered categories. It would be too broad, however, to say that all IP asset purchases are unaffected. The draft expressly reaches certain acquisitions or development of assets in a country of concern that establish a covered foreign person or enable one to engage in covered technology.

Treasury’s FAQ also excludes technology-transfer and technical-knowledge-transfer contracts from one express exception for secondary transactions. That exclusion does not itself make every licence prohibited. It does mean that parties should establish why their arrangement falls outside the covered transaction definition, rather than rely on the contract’s title or assume that all commercial contracts are expressly excepted. Other applicable regulatory regimes require separate consideration.

Equity investments face a much sharper constraint

A U.S. investor’s acquisition of equity in a Chinese biotechnology company engaged in a proposed prohibited activity presents a more direct problem. Unless an exception or exemption applies, the transaction could be prohibited. An equity subscription accompanying an otherwise conventional licence must be assessed separately; the commercial connection to a licence does not remove its investment character.

Convertible instruments, warrants, and debt carrying governance or financial rights characteristic of equity also require attention. Replacing a share subscription with a different financing label will not necessarily change the result. Treasury’s framework addresses both direct and indirect investment and includes obligations concerning U.S.-controlled foreign entities and U.S. persons directing foreign transactions.

The proposed program is not a general pre-closing approval process comparable to CFIUS review. Parties would generally determine whether a transaction is prohibited, notifiable, or outside scope. A notification would not cure a prohibition. Treasury proposes a non-binding feedback process and a national-interest exemption mechanism, but neither should be treated as assured permission to proceed.

NewCo structures require analysis beyond the ownership percentage

The NewCo model can combine Chinese-origin assets with U.S. financing, management, and development capabilities. Its treatment would depend on the structure actually used. Relevant questions include where the company is organized, who controls it, whether the Chinese contributor retains equity, and whether the parties are entering a covered joint venture.

An offshore NewCo’s ownership and control may bring it within the covered-foreign-person definition. The proposal includes aggregate ownership of 50% or more, but also separate direction-or-control tests. Falling below an ownership threshold is therefore not a universal safe harbour. Equally, a minority Chinese shareholder does not automatically make every NewCo prohibited.

For a U.S.-organized NewCo, joint-venture coverage can be particularly important. The draft reaches certain ventures with covered foreign persons wherever located, and a joint venture need not involve creating a separate entity. A structure combining assets, capital, and shared profits and losses may require analysis under that route even where the ownership test does not answer the question.

Consider the difference between a U.S. company purchasing ex-China rights for cash and independently funding development, and a jointly financed venture in which the Chinese contributor supplies IP and shares the enterprise’s profits and losses. The first may remain an ordinary asset transaction; the second raises additional coverage questions. The distinction is substantive and cannot safely be resolved by naming both arrangements a licence.

Implications for cross border dealmaking

For some Chinese biotechnology businesses, losing access to U.S. venture funding or a planned NewCo financing could be devastating to a specific development program. That is a commercial risk assessment, not a conclusion that the proposal bans all U.S.–China biotech collaboration. Conventional licensing and independently operated asset acquisitions may retain an important role.

Deal teams should map ownership and control, assess the relevant science, and review the complete package of financing and collaboration rights before settling the structure. Agreements extending beyond the eventual effective date should address regulatory change and closing conditions. During the comment period, businesses can also explain how particular structures support drug development and where the proposed definitions would impede legitimate transactions.

Sources and status

Treasury Notice of Proposed Rulemaking released October 22, 2026, proposed 31 C.F.R. Part 851; Treasury Fact Sheet and FAQs on the COINS Act NPRM. Analysis current to October 25, 2026.