A proposed rule limiting U.S. investments in Chinese biotechs that’s aimed at protecting national security could put the U.S. at a competitive disadvantage compared with European firms in the race for promising new drugs.
The U.S. Treasury proposal would implement the Comprehensive Outbound Investment National Security (COINS) Act, enacted as part of the FY2026 defense bill. The proposed rule would restrict certain investments, such as equity investments, joint ventures, or financing agreements in biotech and other sensitive industries in “adversarial” countries like China. If finalized in its current form, it could affect dealmaking with Chinese biotech companies and manufacturers at a time when access to Chinese innovation is becoming a cornerstone of U.S. drug development.
The proposed rule won’t ban licensing deals, a Treasury official told STAT, although some experts said it’s not clear whether all agreements would be covered by the exemption.
Licensing agreements currently account for a significant share of U.S.-China biotech dealmaking. There were 92 licensing deals in 2025, according to one analysis by Evaluate, which PharmCube estimates to ring in at $137.7 billion with out-licensing deals included.
The proposed rule reflects growing legislative and industry concerns about the threat China’s burgeoning biotechnology industry could pose to U.S. competitiveness and security. But critics say that closing the door to dealmaking among U.S. companies could leave European firms with more freedom to pursue Chinese drugs.
Major European drugmakers are already making sizable deals for Chinese-developed medicines. In July 2025, British drugmaker GSK agreed to pay Hengrui Pharma $500 million upfront for rights and options covering up to 12 drug programs, with approximately $12 billion in possible future milestone payments. Swiss-based Roche, meanwhile, signed an October collaboration with Hansoh spanning antibody-drug conjugates for cancer, with $400 million upfront, $110 million due on the first anniversary and more than $15 billion in potential milestone payments.
The proposal may already be having a chilling effect on investments in the U.S.
“We’ve heard investors already say they're pausing new deals as a result of this,” said Geoff Meyerson, co-founder and CEO of the life sciences investment bank Locust Walk and its offshoot, Banyan Bio. “My assumption is that things that are already in process that are likely to close before the ruling is final will continue.”
But deals beyond that date may not.
What’s at stake in the final rule
Others believe it doesn’t go far enough. Jeff Marrazzo, co-founder and former CEO of Spark Therapeutics, argued to STAT that licensing agreements with Chinese drugmakers also deserve closer scrutiny.
Meyerson said he supports provisions to protect national security, but submitted comments to the Treasury outlining his concerns about the proposal. In particular, he pointed to the effects it could have on a popular deal model called a NewCo, which is a structure created when a U.S.-based and controlled company licenses a drug from a Chinese firm that is often given a minority equity stake — typically below 20%. Meyerson wants to see additional clarification about whether these investment restrictions apply to this model. Among his questions are: What constitutes a joint venture and what qualifies as a Chinese company?
If NewCos face restrictions, it could restrain U.S. innovation, he said.
“This is a handout or a gift to the European investors and executives and will only be truly felt once the guidance is finalized if it ends up being a block on the equity in NewCos,” Meyerson said. “You can still use NewCos for a license, you would just need more cash. This will mean only the biggest investors will be able to participate, which will still further stifle the activity levels here in the U.S.”
How much of an effect the proposed rule will have depends on its final form, Meyerson said. Treasury officials are currently accepting feedback, and modifications may reduce some early concerns. For now, many are taking a wait-and-see approach.
Overall, he’s hoping that federal rulemaking takes a lighter touch, a view echoed by other industry groups.
"China's growing biotechnology capabilities should not be ignored. But neither should the regulatory uncertainty and policies that have discouraged innovation here at home. Sweeping restrictions on biotechnology investment and collaboration would risk weakening one of America's most strategically important industries,” said John Stanford, executive director of the venture capital advocacy group Incubate, in a written statement.
The industry lobbying group PhRMA also wants to see an emphasis on enhancing U.S. competitiveness while still addressing legitimate national security risks.
The comment period on the proposed rule is open until Dec. 7.
