Goldman Sachs: US proposes limits on investment in Chinese biotechnology, but conventional drug licensing remains open
A US Treasury draft would restrict equity investments, convertible debt and certain joint venture arrangements involving Chinese biotechnology companies. Goldman Sachs believes conventional licensing transactions can still proceed, but structures involving joint funding and shared profits and losses, or attached equity, may fall under the prohibition.
Original source：Goldman SachsFirst published on Unhidea：Original source date：
Key takeaway
Goldman Sachs believes the draft primarily tightens cross-border financing and strategic equity holdings. The channel for licensing Chinese innovative drugs to US pharmaceutical companies can remain open, with the key question being whether a transaction involves equity or joint funding with shared profits and losses.
Will US pharmaceutical companies lose access to Chinese innovative drugs?
The US Treasury has proposed draft investment restrictions under the COINS Act. Goldman Sachs believes the restrictions focus on ownership and financing, rather than a blanket ban on US pharmaceutical companies acquiring rights to Chinese drug assets: commercial licensing agreements are not expressly listed as restricted transactions.
The distinction directly affects existing cooperation models. In recent years, Chinese innovations have entered the global biopharmaceutical ecosystem mainly through drug licensing rather than direct equity investment; consequently, tighter restrictions on strategic equity holdings and on the acquisition of drug assets affect the industry through different channels.
Which transaction structures could bring licensing partnerships under the prohibition?
According to Goldman Sachs's interpretation of the draft, a territorial licensing agreement paid for through an upfront payment, regulatory milestone payments and sales royalties is not a restricted transaction as long as it does not involve the issuance of foreign equity or a shared profit pool. Joint funding or cost sharing for clinical trials without sharing profits and losses also does not constitute a restricted joint venture.
The boundary turns on whether both parties contribute capital or assets and share profits and losses. Such arrangements may be deemed joint ventures even without a separate company; consequently, co-development agreements with those structures may be prohibited.
A license accompanied by an equity purchase or convertible debt would also be prohibited if the counterparty and technology fall within the restricted scope and no exception applies. Transfers of US intellectual property, drug candidates or technology assets to China may likewise be restricted if they form part of a joint venture arrangement.
Which technologies are covered by the financing restrictions, and what exceptions are available?
The draft covers activities that use biological systems to develop, modify, produce or control drugs and their delivery mechanisms, as well as equipment and tools dedicated to drug discovery and manufacturing, such as sequencing platforms. Certain small-molecule compounds that do not involve biological systems do not fall within the prohibition by virtue of the compounds themselves.
The restrictions cover US investors' direct or indirect acquisition of equity or contingent equity in relevant companies, as well as debt financing that carries equity-like governance or profit rights. Access to US equity funding for early-stage Chinese drug discovery companies will also be constrained unless an exception applies.
Exceptions include transactions completed before 18 December 2025, qualifying secondary-market transactions in listed securities and investments in registered investment companies; the latter require that investors obtain no governance rights beyond standard minority shareholder protections. The scope of the restrictions therefore also depends on the investment method and accompanying rights.
When will the final scope be clear, and what else could change?
The rules are currently in draft form. Public comments are due by 7 December 2026, and the Treasury must issue final rules before 13 March 2027. Questions for public comment include whether the scope of drugs should be more precisely focused on cutting-edge technologies, which would affect the final scope of coverage.
Goldman Sachs is also watching the upcoming reauthorization of the Prescription Drug User Fee Act (PDUFA), which it believes could carry China-related policy provisions. The draft also provides a pre-transaction consultation mechanism, allowing parties to obtain confidential, nonbinding Treasury feedback on proposed arrangements or anonymous public guidance.
