THE ARISING · Markets & Strategy
Treasury Poised to Propose Scrutiny of US Licensing Deals With Chinese Biotechs
The U.S. Treasury Department could publish a proposed rule as early as October 23 that would put outbound licensing deals with Chinese biotech companies under added regulatory scrutiny, according to STAT, which cites a report from Endpoints News.
The rule would fall under the Comprehensive Outbound Investment National Security Act, known as the COINS Act. According to STAT, the law places some American investment in Chinese technology under Treasury screening. The proposal would extend that scrutiny to licensing deals in which U.S. companies deal with Chinese biotechs.
For drug developers, this matters because licensing is a main way to bring in outside drug candidates. Any new review step could change how these deals are planned and timed. It could also affect how U.S. companies compete for assets from Chinese biotechs.
The scope of the rule is not yet known. As of STAT's report, no proposed rule had been published. The report's available text does not say which deals would be covered, whether dollar thresholds would apply, or when any rule would take effect. A proposed rule is also only a first step. It is normally open to revision before it becomes final.
Political conditions may shape the outcome. Rob Smith, an analyst at Capital Alpha Partners, wrote to investors that concerns about China's ambitions and a "pervasive anti-pharma view" in many parts of Congress and the administration may make it difficult for the pharmaceutical industry to overcome objections, according to STAT.
That is one analyst's reading, not a settled forecast. The real effect on deal flow will depend on the rule's text. A narrow rule would leave most dealmaking intact. A broad one could add cost and delay for companies that rely on Chinese-originated drugs.
What to watch next
Whether Treasury publishes the proposal, and whether its definitions of covered deals and any thresholds are narrow or broad.
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