Treasury's COINS rule would bar US equity in Chinese biotech and spare cash licences

The US Treasury wants to stop American money from buying into Chinese biotech. Its proposed rule, published in the Federal Register on Oct. 26, adds biotechnology to the list of sectors where US investment in China is restricted, and puts it straight into the prohibited category.

Comments are due Dec. 7. Final rules are due by about March 2027.

The rule implements the COINS Act, which became law in December 2025 as part of the annual defence bill. COINS named five sectors: semiconductors, AI, quantum, supercomputing and hypersonics. Treasury used its power under the law to add a sixth.

…we are committed to putting America's national security first.

Scott Bessent, Treasury Secretary

What the rule covers, and what it leaves alone

Law firms that have read the proposal agree that pure cash licensing survives, while anything that gives a US person an ownership stake in a Chinese biotech is at risk.

• Cash licences (upfront, milestones and royalties with no equity) are generally not covered.
• Equity, contingent equity and joint ventures are potentially prohibited, according to Goodwin.
• Equity paid to a Chinese licensor alongside a licence is prohibited after the effective date, unless the shares are listed and carry no special governance rights, Sidley says.
• Buying CRO and CDMO services is not covered, because procurement contracts aren't investments.
• Publicly traded securities and limited-partner commitments of $2 million or less are exempt.

Sidley calls a NewCo built around a Chinese licensor the highest-risk structure. A 50/50 co-development deal with shared profits and losses could also be treated as a joint venture.

Penalties can reach the greater of $250,000, adjusted for inflation, or twice the transaction value, and Treasury can force a divestment.

Why it matters: China is now a main source of pharma's pipeline

Large drugmakers have spent the past two years licensing molecules from Chinese biotechs at a record pace, and the money involved has grown quickly.

The terms have been moving in China's favour. According to Pharmcube data reported by Reuters, the average upfront payment roughly doubled from 2025 to early 2026.

Here's what this looks like for dealmakers

The rule is not retroactive, but deals and equity tranches that close after the effective date are covered. That puts pressure on anything now in negotiation.

1. Strip equity out of licences with Chinese partners, or limit it to listed shares without board seats or veto rights.
2. Replace profit-sharing with cost reimbursement and royalties, which Sidley suggests as a safer structure.
3. Make sure joint steering committees don't hand a Chinese partner control over decisions in the US licensee's territory.
4. Ask Treasury for nonbinding feedback once material terms are in a binding document.

A national interest exemption exists, and the proposal names US public health needs as a factor. Sidley expects these exemptions to be rare.

The calendar from here

Treasury has already shown it will enforce the existing program. On Oct. 7, it announced its first penalty under the program: $200,000 against a US company that failed to notify Treasury of a $92,478 investment in a Chinese AI company, according to Holland & Knight.

For biotech, the comment period is the last chance to argue about where the line falls between a licence and an investment. Expect drugmakers and their trade groups to press for clearer safe harbours on co-development and steering committees before Dec. 7.