Comment from RA Capital and Peers to Treasury on its Proposal to Add Biotech to COINS

The following is a comment that will be submitted on December 7, 2026 by RA Capital in response to the Treasury Department’s request for public comment on its proposal to add pharmaceuticals and biotechnology to the COINS Act. We are making our comment public both to allow peers who agree to sign on (please fill out this short form to be added to the list of signatories below) and, more importantly, to make it easier for others to submit their own public comment. 

Submitted electronically via Regula​tions​.gov

U.S. Department of the Treasury
 Office of Investment Security
 1500 Pennsylvania Avenue NW
 Washington, DC 20220

Re: Comments on Proposed Outbound Investment Security Program Regulations — Biotechnology and Pharmaceutical Development
 Docket No. TREAS-DO-2026 – 0595
 RIN 1505-AC94
 31 CFR Parts 850 and 851

Dear Treasury Officials:

We are leaders, investors, and entrepreneurs in the US biotechnology industry who share the Administration’s commitment to protecting American national security and technological leadership. 

We appreciate the opportunity to comment on the addition of biotechnology to the COINS Act. 

1. In its current form, the COINS draft rule would unintentionally undermine national security by hollowing out the US biotech sector (see insert below), both by handing control of and profits from medicines originated in China to Europe and also by chilling early-stage investment in US biotechs, since US investors and entrepreneurs will not have the visibility into the global innovation landscape that is essential for assessing the competitiveness of any US company’s programs.
2. The draft rule will not slow China biotech, which will have plenty of capital even without US equity investment. The question is simply whether US companies will remain in a position to license and therefore control manufacturing, development, and commercialization of any drug candidates from China that they consider worth developing for the US and other western markets. From a capabilities standpoint, China is already very good at biopharmaceutical R&D and can continue to learn whatever capabilities they lack from European partners, even if the rule makes co-development and co-commercialization with US pharmaceutical companies more difficult. 
3. In its current form, by potentially blocking even CFIUS-compliant equity-based licensing deals, the COINS draft rule would undermine US biotech leadership by advantaging multinational pharmaceutical companies and European NewCos over the biotech builders, investors, and entrepreneurs who are the backbone of the US biotech ecosystem.
4. The development of novel medicines does not offer China a chokepoint it can leverage against the US in a global conflict because a drug can readily be manufactured by any country that retains the ability to manufacture medicines. 
5. The US needs policies that promote and accelerate domestic biomedical R&D and friend-shore manufacturing of approved medicines, not a ban on cross-border R&D collaboration that would only backfire against our own industry and our national interests.
6. For all its stated concern about acute risks to US national security related to US supply chains, the proposed rule does nothing to shore up domestic manufacturing or restrict the ability of Chinese companies to control distribution of medicines on US soil, with or without the assistance of European partners. 

The net effect for the draft proposal would be to constrain the US biotech and pharmaceutical industry, undermining US national security and economic interests. The COINS draft rule, as written, will backfire on America. But it can be amended to avert harm.

Why the proposed rule in its current form will undermine US biotech leadership

As written, the COINS draft rule appears to allow a US company to pay upfront cash, cash milestone payments, and future royalties on sales to a Chinese company to license a drug candidate. However, the draft rule can be interpreted as restricting granting of equity and co-development and co-commercialization deals, to the extent such deals are considered prohibited ​“joint ventures” under the draft rule. This will advantage European companies and shift control and profits over the best medicines originated in China to Europe. 

European pharmas and investors, but not those from the US, would be free to offer any deal terms that the licensor finds attractive. Chinese companies aspiring to develop and commercialize medicines globally may prioritize retaining control over or involvement in these activities over cash or equity. If US companies are blocked from signing such deals, Chinese pharmaceutical companies will instead do deals with European companies and investors, rather than abandoning their aspirations. After all, COINS does not block a Chinese company from directly developing and commercializing a drug in the US, whether on their own or via a European joint venture or collaboration agreement. 

COINS in its current form will also chill early-stage investment in US biotech, causing the very harm to US capabilities that it seeks to protect against. When an entrepreneur comes up with an idea and seeks funding, investors’ first question is often ​“who else is already working on this and might they have a better drug?” Without an expectation that US companies and investors can invest or license compounds from them, Chinese biotechs have no incentive to talk to US investors let alone allow due diligence. That will leave US companies and investors blind to the true, global competitive landscape. 

As written, COINS will therefore make it difficult for biotech investors to have the necessary confidence in any early-stage program being proposed by an American biotech entrepreneur. European companies and investors will retain full visibility into the global competitive landscape and be able to make investments with greater confidence. Ironically, only foreign investors would therefore know whether a US biotech company has world-class technology and be able to invest in it with confidence.

American entrepreneurs and investors that form new companies (“NewCos”) to license a Chinese program and develop it for the western market often can’t compete with all-cash offers from large pharmaceutical companies. Small companies instead offer a minority equity stake, offloading some economic risk onto the Chinese licensor.

These minority equity arrangements are already subject to strict controls under CFIUS and DSP to maintain American control over economics, governance, and sensitive patient data. Given these existing regulations, a Chinese licensor’s equity stake is nothing more than a royalty on the company’s success.

The net effect of the current proposal is that COINS would constrain only US companies and investors, not anyone else, resulting only in losses to the US and gains for others. 

To preserve investment in all US biotechs, especially by US investors, it therefore remains in America’s interest to allow NewCo CFIUS-compliant licensing arrangements, inclusive of minority equity-stakes, instead of allowing only all-cash licensing deals of Chinese programs. That will preserve the interest of Chinese innovators to engage with US entrepreneurs and investors, in turn preserving the visibility into the global landscape that is necessary for any biomedical investment decision.

Pharmaceuticals should not be included in COINS both because of how it backfires on the US and because the discovery and development of pharmaceuticals are not potential choke-points in a global conflict. Biotech innovation is not akin to rare earths, which must be mined. Neither does the EV precedent translate to biotechnology: China’s EV leadership was built on state-subsidized manufacturing scale and control of battery materials, whereas novel medicines derive their value from US-issued patents since the majority of any drug’s profitability stems from US approval and reimbursement. So licensing by a US-company, accompanied by the transfer of manufacturing out of China, actually strengthens American control over an asset. And even if, in the event of conflict or other disruption of trade, a Chinese company were to try to withhold a promising drug candidate from the US, patents can be broken by any country that can manufacture medicines. 

Recommendations to address national security threats not considered by COINS and mitigate harm from the proposed rule

1. Treasury should mitigate the proposed rule’s harmful consequences to US biotech by affirming that, notwithstanding any other section in 31 C.F.R. 851.226, US persons can invest in companies developing pharmaceutical compounds as defined in 31 C.F.R. 851.226®(4), provided such compounds are not directed towards the pathogens/​toxins referenced in 31 C.F.R. 851.226®(1). 

We are proposing that Treasury whitelist medicines that offer a clear benefit to US patients and do not pose any threat to US public health. Without this whitelisting approach, the US biotechnology sector may well be cut off from huge swathes of innovation in the manner described above, merely because, e.g., a US-owned-and-operated Newco that has in-licensed a drug candidate from China cultivates cells from public cell lines to engage in pharma research (“biological systems”) or vibecodes a script for assessment of its research progress (“computational or bioinformatics tools”). 

Furthermore, in the absence of whitelisting, US investors will be at a disadvantage compared with European investors in understanding the state of innovation globally, which is critical to preserve early-stage investment in US biotech. This is because Chinese biotechs won’t disclose their programs to US investors if there is no prospect of investment. 

To the extent US investors are less confident about what is ​“out there” they will be less confident about investments in early-stage biotechs at home. You can’t invest in a best-in-class molecule if you don’t know what else is being developed for that class. US investors and companies will be blinded and very insecure about US capabilities. In sowing domestic investment insecurity, the COINS draft rule would undermine US national security.

Whitelisting treatment will most effectively preserve investor visibility into the global innovation landscape, which is critical for early-stage investment in US biotech, and allow US pharmaceutical companies, entrepreneurs, and investors to license the most promising medicines originating from China and therefore control the development and commercialization of such medicines for American patients, which is important for supply chain security and brings economic benefit to the US. 

1. Policymakers should instead focus on interventions that preserve US control over critical pharmaceutical manufacturing supply chains (i.e., ​“friend-shoring” manufacturing of medicines approved in the US), which would prevent actual choke points. 

The current draft language does not improve US supply chain security, and we would not suggest that anything to do with friend-shoring of manufacturing be attempted in COINS. Rather, such actions seem more appropriately implemented through amendments to the BIOSECURE Act or via other policy instruments, like a CHIPS Act for biotechnology research and manufacturing. The key point we are making is that the US should be able to count on the continued production of FDA-approved medicines that patients come to rely on as part of US standard of care. This extends to generic drugs, not just novel ones, and requires shifting of much of the supply chain, not just the final fill-and-finish step of production. For the purpose of national biomedical resilience, there is no risk in allowing US companies to contract with Chinese CDMOs to manufacture batches of drug for preclinical testing or clinical trial purposes, but the goal should be for manufacturing to be transferred to other jurisdictions before or soon after commercial launch in the US. However, tariff policy would need to accommodate such friend-shoring to allow small companies to compete against larger ones, because manufacturing on US soil is prohibitively expensive for small companies.

1. If the intent of the COINS draft rule is to prevent Chinese pharmaceutical companies from controlling actual choke points in the supply chain for medicines, COINS would also need to specifically address control over other critical distribution and commercialization (i.e., pricing, sales) activities, not merely ban collaborations with US companies and investment from US investors. 

The current approach of restricting US companies from offering co-development/commercialization terms via joint ventures only grants European companies a strong deal-making advantage. Nothing in the proposed rule actually bars Chinese pharmaceutical companies from controlling choke points related to the distribution and commercialization of a medicine on US soil, either directly or through a JV or co-commercialization agreement with a European pharma. 

In contrast, an activity-based approach that prohibits Chinese pharmaceutical companies from controlling, directly or via joint venture, US commercialization and distribution activity would impact even the kinds of deal structures European companies offer to Chinese companies. This activity-based approach would mean that US development and commercialization would be restricted whether the Chinese company acted independently, partnered with a European company, or partnered with a US company. Intent would then match effect, without disadvantaging US companies and investors versus European ones. A US company could still enter a co-development and co-commercialization deal with a Chinese company for ex-US markets, which would allow US companies to compete for Chinese programs on a level playing field with European companies. 

We recognize that preventing Chinese companies from directly controlling the distribution and commercialization of their medicines on US soil may be outside of the scope of what COINS was designed to do, but that just means that COINS is the wrong instrument for achieving such biomedical national security objectives, if they even are objectives. Whether prohibiting such activities being controlled by Chinese companies is worth pursuing would also require careful consideration in the context of how China might respond and what the US might lose in the balance. For example, we would caution that banning Chinese companies from doing clinical development of their medicines in the US might prompt a reciprocal ban by China on allowing US companies to run trials in China, which would hurt US innovation because of how much faster and more efficiently it’s possible to generate all-important proof-of-concept clinical data in China than anywhere else in the world. 

1. If Treasury does not affirmatively whitelist pharmaceutical compounds in the manner discussed above, Treasury should at least re-scope the set of barred pharmaceutical compounds for research to include only such compounds that are directed towards the pathogens/​toxins listed in 31 C.F.R. 851.226®(1). As a practical matter, direct investment by US persons into Chinese biotechs would still be limited in many cases by the prohibition on companies that engage in lab automation, develop computational tools, use super intelligence systems, etc., as the use of such systems has become standard practice for drug discovery and increasingly drug development. However, removing pharmaceutical compounds from the scope of prohibited technologies would at least clarify the continued acceptability of licensing agreements and, subject to our comment below on clarifying the continued acceptability of minority equity grants as licensing consideration, equity investment in US NewCos focused on the molecules discovered by such companies. 

As compared with a whitelisting approach, a re-scoped definition of pharmaceutical compounds will put US investors at a disadvantage compared with European investors in understanding the state of innovation globally, since Chinese biotechs will only be willing to engage with US investors if they are open to all-cash licensing arrangements. As we stated above, to the extent US investors are less confident about what is ​“out there” they will be less confident about investments in early-stage biotechs at home.

1. Also, if pharmaceutical compounds remain in scope, Treasury must clarify the continued acceptability of minority equity grants to Chinese biopharmaceutical companies as a form of licensing consideration, i.e., the NewCo model. In particular, the definition of ​“joint venture” should exclude entities that have passive foreign licensors with minority stakes. Similarly, the definition of ​“subject to the direction or control” should note that control over the protection of IP and other standard licensing rights does not constitute contractual control over management and policies of a business. Other parallel changes or an explicit exception on this point would similarly be appropriate. Without such revisions, the rule risks disadvantaging US biotech entrepreneurs in favor of foreign entrepreneurs and big, multinational pharma. 

COINS should not override or otherwise undermine the strict regulations specified in CFIUS and DSP to maintain US-company control over economics, governance, and sensitive US patient data with respect to Chinese minority equity interests in US companies. Alignment with CFIUS while preserving deal-structuring flexibility would achieve the goal of restricting foreign control without making US companies less competitive versus European ones when competing to license rights to Chinese programs.

If the definition of ​“joint venture” is not modified to exclude ​“NewCos” of the type described above and existing NewCos formed prior to the implementation of the final rule are not granted an exception, US entrepreneurs and investors will lose and Chinese biotech companies will be the beneficiaries: such Newcos may be forced to wind-down and return rights to the drug to the China licensor, who will then benefit from the data generated by that NewCo for the purposes of their own internal global development or a subsequent license to pharma. 

1. Treasury must also clarify the scope of the anti-evasion clauses, which are drafted so broadly, vaguely, and threateningly as to risk the same harm as a full ban. To be able to engage confidently and competitively in the global arena, US companies and investors need clarity as to which deal structures are actually allowed and would not be judged later to have evaded the intent of COINS. Chinese companies need that clarity too or else will favor a deal with European companies and investors, just as perception of antitrust clearance risk can skew which acquisition offer a company accepts when it has competing offers. 
2. To further bolster US control over frontier platform technology, the government could consider a US ban, via export restriction, on ownership transfer to China of any intellectual property and know-how associated with frontier platform technology related to the development of novel modalities, drug discovery algorithms, and identification of novel biological targets. This would keep important technologies in US control with likely minimal harm to US competitiveness. Such an export restriction would continue to allow for licensing and commercialization of medicines developed using such platforms. 

As a practical matter, US companies focused on such frontier technology tend to be fiercely secretive with respect to critical algorithms and assays and an export ban would merely cement what is already common industry practice. The vast majority of collaborations between Chinese companies and US companies, particularly the NewCos with which we are most familiar with, currently involve the transfer of a Chinese program to a US company’s control without transfer of novel assays, platforms, or other technology to the Chinese licensor. 

We share the administration’s commitment to addressing national security challenges and protecting critical technologies. The draft rule unintentionally undermines national security by giving foreign companies an advantage in controlling ownership and US distribution of the most important medicines originated in China. It also undermines biotech investment in the US by shifting profits from US companies to European and Chinese ones and chilling early-stage investment in what may very well be world-class US technologies, except we can’t tell since we can’t see what else is out there in the world. 

Therefore, we appreciate Treasury’s consideration in correcting these unintended consequences and propose Treasury leave unrestricted the in-licensing of drug candidates from China while focusing any regulation at an activity level (i.e., manufacturing, development, and commercialization) to more fully achieve the intent of protecting sensitive US patient data and medicine supply chains while keeping US companies and investors on equal competitive footing with all others.