The US government is seeking to curb American investment in Chinese firms involved in advanced drug development after adding the biotechnology sector to its list of sensitive technologies.
The addition comes via the Comprehensive Outbound Investment Security (COINS) Act that passed as part of the Fiscal Year 2026 National Defense Authorization Act. The framework expands the government’s ability to restrict or monitor US investment in sensitive technologies developed by companies listed as “ones of concern”. The Act has widely been described as primarily targeting American investment in China.
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The US Department of the Treasury’s proposed rule means biotech joins the list of sensitive technologies alongside semiconductors and micro electrics, quantum computing, and hypersonic systems, amongst others.
In a statement, the Treasury said: “[In passing COINS], Congress made clear that restricting certain US outbound investments into dual-use strategic technologies that benefit a foreign adversary’s military modernisation efforts, surveillance states, and human rights abuses is necessary to prevent harm to US national security and foreign policy interests.”
In a research note, Citi analysts said “The US Treasury’s proposed outbound-investment rules take an expansive approach that, if finalised as written, could curtail US investment across China’s drug-development ecosystem.
“Still, we see credible scope for substantive revisions. Biotechnology was added through the Treasury’s discretionary authority rather than being among the five sectors expressly identified by Congress.
Various biological aspects are included in the draft legislation such as toxins and materials capable of self-repair, but the most relevant to the pharmaceutical industry is the range of compounds listed as “prohibited technology.”
Small molecules, vaccines, and cell and gene therapies are all named, as are monoclonal antibodies and other therapeutic proteins.
This means investment transactions including Chinese biotechs developing those products could be severely curtailed. The framework mostly applies to deals that include equity, meaning traditional licensing deals that have been popular between Western pharma companies and Chinese firms in recent years will fall outside its scope.
An October 2025 report from GlobalData, parent company of Pharmaceutical Technology, found that China-based companies were responsible for 20% of drugs in development globally, reflecting the powerhouse role the country has embraced in the pharmaceutical industry. Cross-border licensing hit $136bn in 2025 – a value more than 27 times higher than the $5bn rate seen in 2020. The trend increased in 2026, although data has not yet been compiled.
Earlier this week, Roche outlaid $15bn in an oncology deal with Hansoh Pharma. Bristol Myers Squibb (BMS), Pfizer, and Eli Lilly have also penned multi-billion-dollar deals.
The new rules will impact the NewCo deal that has become a popular financing route for Western investors targeting Chinese research. Under this model, instead of a direct agreement between an innovator and a big pharma buyer, rights are assigned to a new company, or NewCo, in which companies and investors hold equity.
Amid the surge in deals between Chinese drug developers and US pharma companies, the NewCo model has gained in popularity as it distributes global growth more fairly.
Spotlight intensifies on US-China deals
While US pharma companies looking to sign drug research collaborations will breathe a sigh of relief, biotech’s inclusion on COINS will add to a US-China pharma landscape already fraught with complications.
The BIOSECURE Act came into law this year that limits Chinese biotechs and manufacturers from accessing US funding and collaborating with domestic pharma companies using federal funds.
The US Department of Defense maintains a list, called 1260H, that designates companies of concern for BIOSECURE measures. WuXi AppTec, one of the largest contract research, development and manufacturing organisation (CRDMO) in the world, was added to the list earlier this year. A federal judge has since issued a preliminary injunction blocking the Pentagon from enforcing the designation.
The US restrictions arrive as the Chinese government aims to accelerate its global position in drug innovation. In September, the nation unveiled an ambitious five-year plan for its biomedical industry, with an aim to make and develop 25% of global first-in-class drugs by 2030.
President Xi Jinping has outlined a series of initiatives to achieve this and the wider goal of becoming a global pharma leader. Research and development (R&D) efforts will significantly ramp up, AI and quantum computing will continue to be harnessed in drug discovery, and pharma ecosystems will be built beyond just pipelines. In total, there are 25 priority tasks across innovation capacity, research, and technology.
