Amarin's (AMRN -0.16%) shares rocketed higher after a key FDA committee recommended expanding the label of its triglyceride-lowering drug, Vascepa, to include data showing it can reduce the risk of heart attack and stroke. Meanwhile, shares in CRISPR Therapeutics (CRSP -2.56%) and partner Vertex Pharmaceuticals (VRTX -0.46%) are also soaring following the release of interim, early-stage results for its gene-editing therapy for beta thalassemia and sickle cell disease therapy.

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This video was recorded on Nov. 20, 2019.

Shannon Jones: Welcome to Industry Focus, the show that dives into a different sector of the stock market every single day. Today is Wednesday, November the 20th, and we're talking Healthcare. I'm your host, Shannon Jones, and I am joined by healthcare guru Todd Campbell. Todd, how's it going?

Todd Campbell: Hi, Shannon! Glad to be here! Looking forward to a really good show, and wondering where the heck fall went! I swear, I blinked and it's all of a sudden gone up here in New Hampshire. I guess that's just the way it goes.

Jones: That's just the way it goes, because same thing here. Literally had no fall. It went from being summer to middle of the winter here. I feel your pain. I love the fall.

But what I love, though, is that the biopharma news fairy has been very kind to us, Todd.

Campbell: [laughs] It has!

Jones: As a matter of fact, we've got two awesome updates that have come out of the biopharma space. I want to dive right in.

The first of which is one we've actually gotten a lot of listener questions about. On Twitter, people have been asking about this. It's none other than Amarin, that's ticker symbol AMRN. Amarin, known for its drug Vascepa. It's basically a prescription-strength fish oil pill. It recently had its day in front of the FDA and their panel of advisors to see if the already-approved drug could actually get a broader label and get out to a much wider patient audience. Todd, we've talked about Amarin on the show before, but just give us a brief overview of exactly what the company does and what this fish oil pill is all about.

Campbell: This is definitely one of those "you either love it or hate it" kind of stocks. It's been a battleground stock for a long time. The story stretches all the way back to 2012, when the FDA approved the use of Vascepa as a way of lowering triglycerides, which is fat in the bloodstream, with the thinking that, if we can reduce triglycerides, maybe that ends up reducing the risk of heart attack and stroke. They actually did a study, because the drug was originally approved for use in people with very high levels of triglycerides, 500... what is that? Milliliters per deciliter? Milligrams per deciliter? Escapes me right now, Shannon.

Jones: Close enough.

Campbell: Yeah, close enough. So, very high levels of it. They did a study that actually showed that it also effectively reduced triglycerides in people with 150 to 500. But the FDA said, "No, we're not going to approve the broader label" at that time, for that 150 to 500 cohort of people, because there's really no evidence, no proof, that lowering triglycerides does reduce the risk of stroke and heart attack and potentially death. That was a really big blow to Amarin, because the number of people with 500 or higher is pretty limited. It's pretty small. And the number of people with 150 or more is very big. I want to say that there's 50 to 70 million people in the world with that level or even more.

The idea, very quickly, took hold at Amarin that, if we want to make this drug a blockbuster, we're going to have to conduct a study that actually shows that it does all the things that we hope that it would do, meaning that we lower triglycerides, and in lowering triglycerides, it does indeed reduce the risk of these major cardiovascular events. That was a seven-year study in the making. It took a long time and a lot of money for that study to be run. I think they enrolled over 8,000 patients in the study last year. Sure enough, the data came out, and it works. It shows that, yes, indeed, it does reduce the risk of these major events by overall 25%. It reduced stroke by 28%, heart attack by 31%, and death by 20%, and that was on top of the 25% reduction that patients who usually take Vascepa are also taking statins, and statins also have been shown to reduce the risk by 25%. So, a really important finding.

That gets everybody very excited because, OK, now maybe they'll start to prescribe Vascepa to a much larger patient population. The thing is, the FDA has to weigh in before they can include it on the label to say, "Yes, it works, it lowers the risk, and it can be used in this much larger patient population."

That's where we ended up being last week, waiting for some insight, if you will, into whether FDA will give a green light for this language to be added to the label.

Jones: Exactly. Coming out of that advisory committee panel, they did vote unanimously to recommend in favor of this broader label. Of course with that, though, there was still a lot of debate about how broad this label should be. One panelist, I believe a patient, he actually said, "I don't want this to be cardio candy." There really needs to be some more refinement of who this treatment is right for. As you mentioned, Todd, this really is a very polarizing stock for more reasons than one. More so, I think it really got started because, of course, this is basically fish oil, but it's not exactly your grandma's over-the-counter fish oil that you can get from any drugstore. Amarin has been trying to drive home the point that it's vastly different from those nonprescription options, more so that, if you can take 10 to 40 of those over-the-counter capsules, that equals just one daily dose of Vascepa, because this drug is basically taken in four 1-gram capsules every single day. For them, they've also been hanging their hat on the fact that this is a fish oil capsule that's much cleaner, more pure, it doesn't contain something called DHA as well. What you can get over the counter is not the same as what they're trying to promote.

But still, they were able to come through the advisory committee panel showing that "Yes, we should move forward with this broader label." The FDA, though, ultimately can decide against this. Oftentimes, they do tend to recommend in favor of whatever the panel ends up moving toward, but that's not always the case. I believe the PDUFA date is December the 28th. We could get a decision by the FDA sooner than that or around that same time frame. Of course, all eyes will be on what the FDA ultimately decides, because, Todd, this is a huge market opportunity.

Campbell: It is, it's massive. It's a blockbuster indication. I think that at the peak, statins were selling at a rate of $20 billion a year. That was before a lot of these patents expire. A lot of people look at this and say, say it doesn't go get prescribed to everybody that's currently on a statin, because not everybody's going to have 150-plus, or there is some sort of ratcheting back in the patient population that is included on the label. This could still be a billion-dollar-a-year drug or more. I think that's where the people looking forward -- as investors, that's what we're always saying. That was then; what's going to happen in the future? And the question simply is, will the label, if it's approved -- I think it will be. In the briefing doc, it looked like the FDA was supportive, and it's not like this was a squeaker where you had them vote by a margin of 1 in favor of. It was unanimous. I would be very surprised if they didn't end up approving this addition to the label. So then, the question becomes, what's the size of the addressable patient population?

And then, based on that, what is proper valuation for Amarin? Right now, we've got a market cap of a little bit over $8 billion. I think sales more than doubled last quarter, but they're still looking at maybe $400 million or so in sales in 2019. So, maybe you're saying that's still kind of pricey right now in the current sales. It's like 20X sales. But if you get to a billion, then it's like 8 times sales. Then it's like, maybe I can start to justify that.

So, a lot of this is already baked in, perhaps. There are still a lot of expenses associated, too, with rolling this out to a larger population. They're doubling their sales force from 400 to 800, is what I read, Shannon. So you've got a lot of expenses that are going to be flowing through in 2020. And then, it'll be interesting to see, after approval, will those sales accelerate? And then, what will the run rate be exiting 2020?

And then, just to make things even more confusing for investors, there are some competitive dynamics that people have to be aware of, too. Vascepa isn't the only drug that works to lower triglycerides on the market. AstraZeneca has one, and there are a couple of other companies that are working on their own. The big difference, you highlighted earlier, is that Vascepa, as far as I know, is the only one that is solely EPA, not having any DHA. We don't know whether or not AstraZeneca's study of their drug, which does have DHA, their study for cardiovascular outcomes, will yield a similar result or not. There has been some thinking that the presence of DHA has been what's caused traditional fish oil pills not to have cardiovascular benefits in prior studies. So this is going to be very interesting, to see how that plays out. If AstraZeneca says no, it didn't meet it, then obviously, off to the races for Amarin. But that's a big wild card.

Jones: Yeah. The other thing that I step back and I think about is, even if, let's say, Amarin gets this broader label, and that gets approved. They're trying to go after these secondary prevention patients. These are basically patients that haven't had an established cardiovascular disease history. By and large, these are patients that are probably very asymptomatic. Even assuming that the doctor prescribes this -- because right now, it's a little over $300 for about a month's supply -- I just wonder what the uptake of a prescription like this will be. Of course, they're used in conjunction with other therapies right now, but if you're talking about moving the prevention needle a little bit earlier, and there's a cost involved, and I may be asymptomatic at the moment, how many people will actually go back to get those prescriptions refilled? How many of them will be compliant and adherent to therapy? I think we've seen this in other cases, where the data, the evidence was there, the drug was able to make it across the approval finish line, but then, in a commercial setting, it just didn't have that same stickiness, that same appeal. To your point, Todd, I think this is really where Amarin is going to have to beef up its sales force and beef up its commercial team to really drive and educate even more so.

The other question mark I have is, does this make Amarin a potential, even more so, buyout target for another big pharma who is facing some patent cliff issues?

Campbell: Perhaps. A lot of people have been holding out hope that's what will happen. Obviously, it'd be a lot easier to take this drug and then market it through an existing sales force. If somebody else came in, like J&J or Pfizer or AstraZeneca, or anybody came in with these large sales forces, be able to turn them loose, not have to hire all these brand-new people. But that hasn't happened yet. I think that it probably won't happen until we know more how those competitive trials pan out. If the competitive trials pan out well, how much do you really want to spend? Is it worth the 8X? How many years of patent protection do we have on this? It's already been on the market since 2012. So I think there's a lot of different dynamics there. I could see it happening, but I think we have to wait and see how these other trials play out. I think AstraZeneca could have data from their trial either next year or maybe 2021. I think there's a smaller competitor out there that's working on one, and we should have results at the end of this year for theirs as well. That has DHA in it, too. Maybe that will give a little bit of a look-through to what could happen with AstraZeneca. So it's a little bit of a wait-and-see game now, especially since shares have rallied so significantly already following the ad com decision.

Jones: Yeah. A lot to watch in the fish oil pill wars that are just getting started.

AlL right, Todd, the story I've been waiting to talk about, that is none other than fresh news from CRISPR Therapeutics. That's ticker symbol CRSP. They just released first in human-trial data. So much excitement and so much buzz about gene editing, the promise of gene editing. I can tell you, even just here at Fool HQ, yesterday, Tom Gardner, Motley Fool co-founder and CEO, literally interrupted a meeting to step out and ask why CRISPR's stock was skyrocketing. So there's a huge amount of focus on the stock here at Fool HQ, and really around the globe. Shares of CRISPR, if you look at just year to date, they're up 144% this year. Granted, it's been a very bumpy road. But, Todd, it's not just CRISPR making big moves. Also, its partner, which shared data with them yesterday, Vertex Pharmaceuticals, is up as well. What can you tell us?

Campbell: CRISPR jumped from $40 to about $70 just since mid-October. That's an amazing move. Vertex Pharmaceuticals, no slouch on its own. Obviously a massive company, so it's pretty impressive that it's gone from $172 to $216 at the time we started talking today. We're talking about two companies that have made huge moves. The reason for that excitement or optimism is preliminary data for CTX001, which is a gene-editing tool, therapy, however you want to describe it, that's in Phase 1/2 studies for people with beta thalassemia and sickle cell disease, which are two diseases that are characterized by faulty ability to produce hemoglobin. What we saw from CRISPR and Vertex as far as data was pretty compelling. But, we always have to temper expectations. We are talking about only two patients. One patient with beta thalassemia, one patient with sickle cell disease. But, we did see some pretty remarkable outcomes, if you will, so far with reductions in the need for transfusions. Beta thalassemia patients typically have to have many transfusions per year to survive. Also, a reduction in vaso-occlusive crisis, which is a very painful event that happens to sickle cell disease patients, oftentimes lands people in the hospital. The one patient who had come into the study having suffered a median of seven of those per year hadn't had any over the course of the ensuing four months or so. And then, in the beta thalassemia, we saw a situation where the person hasn't had to have transfusions for a number of months after receiving CTX001 as well.

So, yes, a lot of excitement, if you will, for the potential to reengineer a patient's ability to produce adequate amounts of hemoglobin.

Jones: Yes. Another key data point that stuck out, too, was the levels of fetal hemoglobin. Really, with high levels of fetal hemoglobin for beta thalassemia or sickle cell, it's beneficial because it does bind to oxygen better than adult hemoglobin. Management was going in expecting to see levels at about 30%. Again, it's just two patients. I want to temper expectations here. But, early results, it was at 99.8% for certain types of red blood cells contained for the beta thalassemia patient, and 94.7% in the sickle cell patient. This is an important area to watch. I think this will really determine the curative potential. Obviously, if you're talking about gene editing, you're hoping for a cure, and the levels at which their treatment can actually be durable over the long term. We're not seeing a lot of these cells revert back to what they were. That's the key here. We'll know moving forward just how durable this treatment is. But right off the bat, extremely encouraging.

I know they have plans to enroll up to 45 patients in each disease over the next two years. This is still very much an early sign of what is to come. But, just like we talk about all the time, Todd, with biopharma, biotech, you could have really good early phase 1-2 data, and oftentimes, when you expand it into a phase 3 setting, all goes away. Tempered expectations. But, really encouraging.

You also saw some other gene-editing companies like Editas jump up on the news as well. I think all in all, the scientific community and also investors are really cheerleading that, OK, there is something to gene editing. The question is, though, just how durable of a response is it?

Campbell: Yeah, and the safety. The safety is an issue, too. We're talking about CRISPR-Cas9, the ability basically to take pieces of a cell, cut away part of DNA, and replace or edit and delete parts of your body. Now, in the case of this particular medicine, or therapy, what we're doing is, we're taking progenitor cells, and we're removing them from the body, and we're reengineering them so that they can actually produce that infant, or the young -- the one we're born with -- ability to make hemoglobin. In typical patients, that eventually shuts off, and adult hemoglobin is produced. What they're trying to do here is say, if we can produce the hemoglobin that is produced early on when we're first born, maybe we don't need the adult. And so far, again, that's what, maybe, the evidence is suggesting at this point. We had, in beta thalassemia, I think nine months of transfusion independence for someone who often had to get these blood transfusions. You have to remember, too, that blood transfusions are expensive. They put patients at risk for organ damage. There's definite need for a better mousetrap, if you will. Certainly, it seems like gene editing could be that mousetrap. But we also have to remember, one of the fears is that gene editing may have unintended consequences. We won't know if there really are those unintended consequences for a while -- which is, again, why we're watching this trial play out over the course of the next couple of years.

Investors should also realize that even if the phase 1/2 trial is eventually successful -- and again, we're talking about one patient for each of these indications, 45 to enroll in each of these indications -- even if it is successful, they're still going to have to do a registration trial after that. We could be talking, I don't know, eight years before this is something actually that could make it to market. We should bear that in mind as we're trying to figure out whether or not this is an investable moment for these stocks.

Jones: So true. Still very early on. As you mentioned, safety is going to be an important consideration. Thankfully, there weren't any serious adverse events, but there were some concerns even just with the preconditioning regimen, to get the patients ready to receive this, where they started to see some concerns. So it's not without its risk. Also, as you mentioned, Todd, long term, what are the unintended consequences of gene editing? A lot to watch in this space. You've got competitors also attempting to do the same thing. But, like always, we will keep all of our listeners up to date on all the latest.

As for us in this week's Industry Focus: Healthcare show, that'll do it! We want to thank you so much for tuning in! As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. The show is being mixed by Austin Morgan. For Todd Campbell, I'm Shannon Jones. Thanks for listening, and Fool on!