COINS Act Biotech: Treasury Proposes Barring US Investment in Chinese Drug Developers

What the Treasury proposed on 22 October 2026

Treasury proposed regulations to implement the Comprehensive Outbound Investment National Security (COINS) Act, which Congress enacted on 18 December 2025 in the National Defense Authorization Act for Fiscal Year 2026. According to the Treasury's programme page, the existing regime has applied since 2 January 2025 under a 2023 executive order and covers semiconductors, quantum technologies and artificial intelligence.

The statute names five sectors, but lets the Secretary add technologies that enable the military, intelligence, surveillance or cyber capabilities of a country of concern. Treasury used that power to add biotechnology, alongside expanded rules for semiconductors, quantum, supercomputing and hypersonics. The countries of concern are China (including Hong Kong and Macau), Cuba, Iran, North Korea, Russia and Venezuela under the Maduro regime, which Treasury says no longer meets the definition. The rule is not yet in force: a final rule will set the effective date.

Which biotech activities the COINS Act rule would prohibit

Biotechnology would be a prohibited technology, not merely notifiable. The proposed rule targets the development, engineering or use of a biological system to modify, enhance, produce or control five categories of output, plus related equipment.

Proposed prohibited category	What it covers
Pharmaceutical compounds	Small molecules, polymers, vaccines, blood components, allergenics, cell and gene therapies, monoclonal antibodies and recombinant proteins, and their delivery systems
Agents and toxins	Export-controlled agents or toxins and novel ones with similar effects
Materials and fuels	Energetic materials, novel functional materials such as biosensors, and biofuels
Brain computer interfaces	Development or production
Equipment and tools	Biomanufacturing equipment, sequencers, certain cell sorters and mass spectrometry instruments, bioinformatics tools, and lab automation or cloud lab infrastructure

Treasury itself asks whether "pharmaceutical compounds" should be narrowed to advanced or frontier technologies. The rule would also prohibit investment in companies on certain US government lists, including the Office of Management and Budget's list of biotechnology companies of concern under the BIOSECURE Act.

Who must comply: US persons, subsidiaries and funds

The obligations fall on US persons, a term the Treasury fact sheet defines to include US citizens and green card holders wherever they live, US entities and their foreign branches, and anyone in the United States. US persons would also be responsible for transactions by their controlled foreign entities, so a European subsidiary of a US group is in scope.

Covered transactions include acquiring equity or contingent equity, certain convertible debt, joint ventures, greenfield investments and limited partner stakes in non-US funds. A US person who directs a foreign person's transaction is also caught, which matters for private fund managers with American partners. There is no screening process or list of covered companies: each investor must conduct a "reasonable and diligent inquiry".

Under the proposed knowledge standard, an investor is treated as knowing a fact if it actually knows it, is aware of a high probability of it, or could have learned it through that inquiry. Not asking about a target's research programme will therefore not be a defence.

Why licensing deals look safe, but equity and joint ventures do not

Plain licensing appears to sit outside the rule. As the American Action Forum noted on 23 October 2026, conventional deals built on upfront payments, milestones and royalties generally fall outside covered transactions. It cites IQVIA data that 40% of assets in-licensed by large pharma in 2025 had a Chinese licensor.

The risk is in the structure. An equity kicker, a joint venture or convertible financing alongside a licence could become a prohibited transaction. The exception for contractual arrangements excludes technology transfer, so advisers will want to review deal structures before signing. Publicly traded securities and limited partner commitments of $2 million or less are excepted.

Penalties, exemptions and the 7 December deadline

Violations would attract civil penalties up to the greater of $250,000, adjusted for inflation, or twice the transaction value, and Treasury could force divestment. The rule offers a national interest exemption, non-binding feedback and voluntary self-disclosure.

Transactions completed before 18 December 2025 are excepted, as are capital calls under binding, uncalled commitments made before the final rule takes effect. That gives existing funds some protection, but new commitments made from now on carry the risk that the final rule bites.

Industry pushback was immediate. The Biotechnology Innovation Organization's chief executive, John Crowley, said "we cannot restrict our way to success". Pharmaphorum reported that a separate bill, the Biotech Investment National Security Act, is pending in Congress.

What life sciences companies and investors should do now

The COINS Act biotech proposal is a draft, but its scope means preparation should start before the final rule. Practical steps include:

• Map exposure. Identify holdings, joint ventures and pipeline partners with ties to China, Hong Kong or the other countries of concern.
• Check who is a US person. Include US parents, US partners on deal teams and US limited partners.
• Review structures. Separate pure licensing from equity, options and technology transfer terms.
• Comment. Submit views on the pharmaceutical compounds definition by 7 December 2026.

Sanctions and export control specialists are natural partners, as with secondary sanctions. Advisers in the United States and Hong Kong are listed in the Corporate INTL directory, and more coverage is in our life sciences newsroom.

Frequently asked questions

What is the COINS Act?

The Comprehensive Outbound Investment National Security Act, enacted on 18 December 2025 in the FY2026 National Defense Authorization Act, gives the US Treasury statutory power to prohibit, or require notification of, certain investments by US persons in sensitive technology companies linked to countries of concern such as China.

Does the COINS Act cover biotech?

The statute lists five sectors that do not include biotech, but Treasury used its power to add technologies. The 22 October 2026 proposed rule makes biotechnology, including pharmaceutical compounds developed using biological systems, a prohibited technology.

When do the COINS Act biotech rules take effect?

Not yet. Comments are due by 7 December 2026, and the effective date will be set in a later final rule. Until then, the existing regulations at 31 CFR Part 850 continue to apply to semiconductors, quantum technologies and artificial intelligence.

Are China biotech licensing deals banned?

Conventional licences built on upfront payments, milestones and royalties appear to fall outside covered transactions. Equity stakes, joint ventures and certain convertible debt in a covered Chinese biotech could be prohibited, and the contractual exception does not extend to technology transfer.

Does the rule affect non-US companies?

Yes, indirectly. It binds US citizens and green card holders worldwide, US entities and their foreign branches, and makes US parents responsible for their controlled foreign entities. A European subsidiary of a US group, or a fund with US partners, could be caught.

What are the penalties?

Civil penalties could reach the greater of $250,000, adjusted for inflation, or twice the value of the transaction, under the International Emergency Economic Powers Act. Treasury could also compel divestment of a prohibited investment.

Sources

1. US Treasury: Treasury Issues Proposed Rule to Implement Comprehensive Outbound Investment National Security Act (22 October 2026)
2. US Treasury: Notice of Proposed Rulemaking, Outbound Investment Security Program Regulations
3. US Treasury: Fact Sheet and FAQs on the COINS Act NPRM
4. US Treasury: Outbound Investment Security Program
5. American Action Forum: New COINS Act Regulations Restricting Biotechnology Investment Leave Critical Questions Unanswered
6. BIO: Statement on Proposed Rule to Implement the COINS Act
7. Pharmaphorum: US Treasury proposes curbs on Chinese biotech deals

About this article

This analysis was researched and written by The Corporate INTL Newsroom, which covers cross-border legal, regulatory and business developments for lawyers, professional advisers and financiers in over 150 jurisdictions. It has been checked against the Treasury's proposed rule, fact sheet and announcement. The rule is a proposal and may change before it is finalised. This article is general information, not legal advice; for advice on a specific matter, consult a qualified adviser. Last reviewed 29 October 2026. For more analysis like this, visit the Corporate INTL newsroom or subscribe to Corporate INTL.