Treasury Proposal Puts China Biotech Deal Structures in Focus

Fierce Biotech reports that the U.S. Treasury Department has released proposed rules that would add biotechnology to restrictions under the Comprehensive Outbound Investment National Security Act involving countries of concern, including China.

Under the draft regulations, pharmaceutical compounds would be treated as a prohibited technology. Fierce Biotech reported that the category includes small molecules, polymers, vaccines, blood products, allergenics, cell and gene therapies, monoclonal antibodies, other recombinant therapeutic proteins and delivery systems.

Traditional licensing largely remains outside scope

According to Fierce Biotech's account of Treasury materials, the proposed rules would cover certain equity acquisitions, debt financing convertible to equity or carrying certain rights, greenfield investments, corporate expansions, joint ventures and certain limited-partner investments.

Traditional asset licensing agreements generally fall outside the definition of covered national security transactions, Fierce Biotech reported. These arrangements can involve cash, milestones and sales royalties for rights outside China. The outlet also reported that fee-for-service drug research and development collaborations are largely spared under the draft approach.

The distinction places attention on transaction structure for pharmaceutical and biotechnology companies working with Chinese counterparts. A licensing arrangement may be treated differently from a transaction that includes an equity investment, joint venture or other covered capital commitment.

Equity and shared-development structures may face review

Fierce Biotech reported that the proposed rules could affect structures that combine licensing with equity investment. The outlet cited Pfizer's agreement with 3SBio, which included an equity investment, as an example of a structure that would be prohibited under the proposal.

The draft also identifies entry into a joint venture as a regulated transaction category. Treasury did not define the term in the proposed rules, Fierce Biotech reported. Instead, the department described a joint venture as involving contributions of capital or assets by two parties and the sharing of profits and losses.

Fierce Biotech said this approach creates uncertainty for collaborations involving co-development funding and shared commercial economics, including arrangements in which both parties contribute to research and development and share profits or losses without forming a new entity.

Treasury seeks comments on proposed scope

Fierce Biotech reported that Treasury is seeking comments until Dec. 7, 2026. The department is also requesting feedback on whether and how pharmaceutical compounds should be more precisely scoped toward advanced or frontier technologies.

The Biotechnology Innovation Organization and MassBio urged a targeted approach in statements cited by Fierce Biotech. Both organizations emphasized the importance of addressing national-security concerns while preserving innovation and international partnerships.