Treasury Proposes Adding Biotech to Outbound Investment Restrictions Under COINS Act

The US Department of the Treasury has proposed adding biotechnology to the sectors covered by its Outbound Investment Security Program, a move that could restrict some US investments in biotechnology companies in China and other countries of concern.¹ The proposed rule, issued October 22, 2026, implements the Comprehensive Outbound Investment National Security (COINS) Act, which Congress passed as part of the Fiscal Year 2026 National Defense Authorization Act.¹

The COINS Act itself names five technology sectors: semiconductors and microelectronics, artificial intelligence, quantum information technologies, high-performance computing, and hypersonic systems.¹ It also authorizes the Treasury Secretary to add technologies that enable the military, intelligence, surveillance, or cyber-enabled capabilities of a country of concern, and the Secretary has used that authority to add biotechnology.¹

“The proposed regulations would strengthen the existing Outbound Investment Security Program to prevent our adversaries from using U.S. investment to develop critical technologies that threaten U.S. national security,” said Treasury Secretary Scott Bessent.¹

Which biotech activities would be covered?

According to a Treasury fact sheet, the proposed rule would prohibit US investment involving certain bio-derived compounds or materials; brain-computer interfaces; biomanufacturing equipment and facilities; biotechnology or equipment involved in biological design, sequencing, and other activities; bioinformatics tools; and hardware or software for automated scientific discovery or experimentation.²

The countries of concern are the People’s Republic of China, including Hong Kong and Macau, along with Cuba, Iran, North Korea, and Russia.² Covered foreign persons include entities organized under the laws of those countries or majority-owned or controlled from them.²

What does it mean for licensing deals?

For drug developers, a central question is whether the rules would reach licensing deals, as large biopharma companies have increasingly turned to China for innovation.³ The fact sheet indicates that covered transactions center on equity investments, convertible debt, joint ventures, greenfield investments, and certain limited partner investments.² Contractual arrangements are excepted, but the exception does not extend to arrangements for technology transfer or technical knowledge transfer.²

Before the rule was released, Laurie Burlingame, an attorney with Morse, Barnes-Brown & Pendleton, told Fierce Biotech that “a pure license without there being an equity component or an option” would not necessarily be covered, while noting that joint venture and NewCo structures could be more exposed if the rules extended to biotech.³

How is the industry responding?

MassBio, which represents more than 1,700 members of the Massachusetts life sciences industry, emphasized the role of cross-border deals. “For Massachusetts’ biotech industry, international partnerships and licensing agreements can bring promising scientific discoveries into the U.S. drug development pipeline, where American companies invest in and advance potential new therapies,” said Kendalle Burlin O’Connell, chief executive officer and president of MassBio.⁴

“MassBio has consistently emphasized in discussions with Treasury officials and members of Congress that efforts to address national security risks must be carefully targeted to avoid undermining the innovation ecosystem that has made the United States a global leader in developing new medicines,” she said.⁴

In a BioPharm International® interview at BIO 2026, Oren Livne, co-chair of the North America Healthcare and Life Sciences Group at Baker McKenzie, discussed how policy pressures, including geopolitical tensions, are shaping deal structures. He said that “just because we’re talking about these policy issues today doesn’t mean 7 to 10 years from now, when these products actually launch, that you’re going to see those same issues.” He added, “So, having that more robust flexibility structure in those deals allows [contracts] to be flexible for the future.”

What happens next?

Treasury is inviting comments on all aspects of the proposal, including the scope of covered transactions, definitions of key terms, notification requirements, and penalties.¹ Comments are due December 7, 2026.²

“MassBio is carefully reviewing the proposed rules and intends to submit comments to help ensure that any final regulations protect national security without limiting opportunities for American biotech companies, weakening U.S. competitiveness, or delaying American patients’ access to innovative medicines,” Burlin O’Connell said.⁴ Final implementing regulations, which will set the program’s effective date, will follow at a later date.¹

References

1. US Department of the Treasury. Treasury Issues Proposed Rule to Implement Comprehensive Outbound Investment National Security Act. Press release. Published October 22, 2026. Accessed October 23, 2026.
2. US Department of the Treasury. Fact Sheet and FAQs: COINS Act Notice of Proposed Rulemaking. Accessed October 23, 2026.
3. Liu A. As calls for COINS Act expansion grow, will new rules sweep up China biotech licensing? Fierce Biotech. Published May 26, 2026. Accessed October 23, 2026.
4. MassBio. Statement from MassBio CEO & President Kendalle Burlin O’Connell on proposed COINS Act rules. Emailed statement to BioPharm International. October 22, 2026.