March 6 (Reuters) - The U.S. Senate's homeland security

committee voted on Wednesday to approve a bill that could

restrict business with Chinese biotech companies like BGI and

WuXi AppTec on national security grounds.

The bill is designed to keep Americans' personal health and

genetic information from foreign adversaries. The bill has

spurred deep concern among investors, driving a sell-off in the

shares of WuXi AppTec when news of its introduction first

reached Chinese markets last month.

While the bill has a long way to go before becoming law, and

could change considerably along the way, the vote of approval is

a step forward that will likely concern investors who do not

want to see the Chinese companies limited in an important

market.

WuXi AppTec, for example, generates more than half of its

sales from its U.S. business and operates facilities across the

country including in Georgia, Pennsylvania and California, as

well as a new campus set to open in Delaware.

WuXi and BGI have argued that their names should be

stripped from the bill, but the bill that was advanced from

committee still named the companies. The bill was, however,

amended to exempt preexisting contracts and agreements.

The committee voted 11-1 to move the draft legislation

forward.

Once it moves out of committee, the bill must pass in both

the full Senate and the House, and then needs be signed by the

president. It is not immediately clear when the bill will be

brought to the Senate floor for a vote.

Senator Rand Paul, a Republican from Kentucky, was the sole

'no' vote and said that senators were "taking advantage of anger

towards China to do sort of parochial protectionist things for

their particular state."

He also voiced concerns about the effect the bill could have

on the biotech supply chain for U.S. companies.

As currently written, it would prohibit federal agencies

from contracting with China's BGI, MGI, Complete Genomics, WuXi

AppTec, their affiliates and other biotechnology companies

deemed of concern. It would also stop the government from

entering contracts with companies that use their equipment or

services.

The companies have denied they pose any security threats.

The Biotechnology Innovation Organization (BIO), a

Washington-based trade association representing biotechnology

companies in the U.S. and more than 30 other countries,

including WuXi AppTec, had urged the committee to reconsider the

legislation.

"Explicitly naming companies for punitive measures

establishes a precedent whereby companies can ... be punished

without necessary and appropriate review," BIO CEO Rachel King

wrote in a letter to Peters, a Democrat, and Paul.

A companion bill introduced in the House in January accuses

BGI, a genomics company, of posing a threat to U.S. national

security through its collection of genetic data. It describes

MGI and Complete Genomics as subsidiaries and affiliates.

WuXi AppTec, which provides R&D and manufacturing services

to the pharmaceutical and healthcare industry, allegedly has

ties to the Chinese military, according to the House version of

the bill.

The companies have said the proposed legislation contains

false, misleading and unfounded allegations.

San Jose, Calif.-based Complete Genomics said there is no

basis for its inclusion in the bill, which it said will foster a

monopoly in the U.S. genomic sequencing instrument market. The

company said.

Rick Connell, WuXi AppTec's chief operating officer for the

U.S. and Europe said in a statement on Tuesday that the company

"does not pose a national security risk," and is "a trusted

partner to customers in the U.S. and around the world." The

company did not respond to a request for comment on Wednesday.

BGI Group said it does not have access to Americans'

personal data. It said the legislation will drive it out of the

U.S. and limit competition.