Outbound investment biotech rule puts US stakes in Chinese biomanufacturing plants under Treasury review

The US Treasury has published an outbound investment biotech rule in draft form, and it reaches the places where medicines are made. The proposal, released on 22 October 2026, would add biotechnology to the program that screens American money going into China and other countries of concern. Biomanufacturing equipment and facilities are on its list. Investors in peptide plants, contract makers and joint ventures in China now have until 7 December to tell Treasury where the lines should fall, before a final rule sets a start date.

What Treasury proposed under the COINS Act

Treasury issued the notice of proposed rulemaking on 22 October to carry out the Comprehensive Outbound Investment National Security Act, known as the COINS Act, which Congress passed inside the defense authorization law for fiscal 2026. The draft sets up two tiers. American persons, including foreign entities they control, would have to notify Treasury about some deals with covered foreign persons active in notifiable technologies, and would be barred from other deals involving prohibited technologies. The law itself names semiconductors and microelectronics, artificial intelligence, quantum information, high performance computing and hypersonic systems. Biotechnology is not on that statutory list. Treasury added it using a power in the act to cover technologies that can enable the military, intelligence, surveillance or cyber capabilities of a country of concern.

Treasury Secretary Scott Bessent framed the change as a security step. "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," he said in the Treasury press release. The draft also covers definitions, excepted transactions, what a notice must contain, a route for non binding feedback and confidential filings, and penalties for violations. It sets a knowledge standard as well: an investor is expected to make a reasonable and diligent inquiry about the company on the other side of a deal. Treasury said final regulations will follow later and will set the date the new duties begin, so the outbound investment biotech rule does not yet bind anyone.

Which biotech activities the draft names

According to a BioPharm International report on the draft, the biotech portion lists six areas. They are certain bio derived compounds or materials, brain computer interfaces, biomanufacturing equipment and facilities, biotechnology or equipment used for biological design and sequencing, bioinformatics tools, and hardware or software for automated scientific discovery or experiments. For peptide makers the facilities item matters most, because it reaches the buildings where active ingredients are produced and not only laboratory tools. The report did not say which of the six areas would be prohibited outright and which would only need a notice, and Treasury's own statement does not split them either. That split will decide whether a given plant deal is barred or only reported.

That split will decide whether a given plant deal is barred or only reported.

The draft names China, including Hong Kong and Macau, along with Cuba, Iran, North Korea and Russia as countries of concern, the report said. A covered foreign person includes a company organised under the laws of those countries, or one majority owned or controlled from them. For peptide supply this points mainly at China, home to many ingredient makers and contract manufacturers that serve Western drug companies. Whether a peptide synthesis or purification plant counts as a biomanufacturing facility will depend on the definitions and technical specifications in the full notice, which Treasury posted on regulations.gov. Investors and plant owners will need to read that text line by line rather than rely on the short category names quoted in early coverage of the proposal.

Joint ventures and greenfield plants in scope

The outbound investment biotech rule reaches several kinds of transactions, according to BioPharm International: equity stakes, convertible debt, joint ventures, greenfield investments and some limited partner positions in funds. Greenfield means building a new operation from the ground up, so a US company planning its own production site in China could fall inside the draft as written, depending on the activity carried out there. Contract arrangements are excepted. That exception does not stretch to deals that transfer technology or technical know how, the report said. For contract manufacturing this line is delicate, since a drug sponsor that hires a Chinese plant often shares its process details with that plant, and the final wording will have to show where a supply contract ends and a technology transfer starts.

The rule also touches how drug assets from China reach Western buyers. Lawyers have argued about licensing for months. Speaking to Fierce Biotech in May, before the draft was released, attorney Laurie Burlingame of Morse, Barnes-Brown and Pendleton said "a pure license without there being an equity component or an option" would not necessarily be covered, while joint venture and NewCo structures could be more exposed. Peptide programs sit inside that debate. This week BioPharm International also reported that Gilead agreed to buy the oral IL-23R peptide program of Shanghai based PepStar Therapeutics for $1.275 billion upfront. None of the reports we read says whether the draft would apply to a program purchase of that kind, and Treasury has not commented on it.

MassBio and the comment window

Industry groups have started to respond. MassBio, the Massachusetts life sciences trade group, said it plans to file comments, and its chief executive Kendalle Burlin O'Connell told BioPharm International that "efforts to address national security risks must be carefully targeted to avoid undermining the innovation ecosystem." Treasury asked for views on every part of the notice, including its scope, definitions, notice requirements and penalties. Comments are due on 7 December 2026. After that, Treasury will write final regulations, and only then will investors know the start date and the settled list of covered activities. For a plant stake or a joint venture under negotiation today, the draft is a signal of direction rather than a binding rule, and the parties will have to weigh that uncertainty themselves.

The draft adds to a stack of US measures aimed at where medicines and their ingredients are made. Congress has already passed a version of the BIOSECURE Act aimed at some Chinese biotech suppliers. Washington has also announced a 100% tariff on branded drug imports, with an exemption for companies building plants in the United States. Those tools act on purchases and imports. The new proposal acts on the money side, on stakes and new sites abroad, which makes it the first of the three to reach capital before a factory exists. Readers can follow these measures side by side on our trade desk page, where supplier laws and tariffs are grouped.

Conclusion

The outbound investment biotech rule is still a draft, but it puts biomanufacturing equipment and facilities in China and four other countries inside a US screening program. Equity stakes, joint ventures and new sites could need a notice or be barred, while plain contracts are excepted unless they move technology. Which activities are barred and which are only reported, and what counts as a covered facility, stay open until Treasury finishes the rule after comments close on 7 December.