Amgen Inc. (NASDAQ:AMGN) and Bristol-Myers Squibb's (NYSE:BMY) medicines, and a novel alternative to heart surgery using heart valves made by Edwards Lifesciences (NYSE:EW), are leading to big changes in how doctors treat heart disease. 

In this edition of The Motley Fool's Industry Focus: Healthcare podcast, analyst Kristine Harjes is joined by contributor Todd Campbell to explore cholesterol busters, anticoagulants, and a surgery that may be safer than traditional open heart surgery.

A full transcript follows the video.

This podcast was recorded on Feb. 15, 2017.

Kristine Harjes: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. Today is Feb. 15, and this is the healthcare edition of the show. I'm your host, Kristine Harjes, and I have healthcare specialist Todd Campbell on the line. Welcome to the show, Todd!

Todd Campbell: Hi, Kristine! How are you today?

Harjes: I'm doing pretty well! How are you?!

Campbell: My muscles are sore. I'm up in New Hampshire, and we got absolutely buried in snow this past weekend.

Harjes: I heard you guys got dumped on and I was shocked because here in D.C., we got nothing.

Campbell: Consider yourselves lucky! We got over a foot of snow. I think I might actually break down at the end of this year and buy myself the snow blower.

Harjes: That is a worthwhile investment. I wouldn't blame you one bit.

Campbell: I know my back will appreciate it.

Harjes: Well, I have heard that shoveling is a good exercise.

Campbell: It is pretty heart healthy.

Harjes: Hah, you are alluding to the theme of today's show, so I will dive into laying that out. Yesterday was Valentine's Day, Feb. 14. And we're not done celebrating just yet. In the spirit of the holiday, this week's show is all about hearts. Specifically, we're going to give some cardiac stocks a little bit of love. It's a pretty big deal. When you look at the heart disease, it's the number one cause of death in the United States. It kills more people than cancer and anything else. It's just insane when you look at some of the numbers. Somebody in the U.S. has a heart attack every 34 seconds. So, clearly, in the world of healthcare and drug developers and medical-device makers, this is a big market. So, there are a lot of stocks that we can talk about, and a lot of different devices and drugs. We're going to try to touch on a whole bunch of different ones today. Sound good, Todd?

Campbell: This is going to be an exciting show. I'm really looking forward to this.

Harjes: Yeah. So, let's start with cholesterol. Twenty-five million, and probably more, Americans take statins to control their cholesterol to prevent cardiovascular diseases. But, there is a new type of cholesterol buster that has come into town -- actually, it's already in town, it's already on the market. These are called PCSK9 inhibitors. I think I've talked about them on the show before, but as a refresher, Todd, do you want to explain what makes them different?

Campbell: Sure. We have the major ways to treat high bad cholesterol. We have statins, that have been around since the '90s. What statins do is limit the production of cholesterol in the liver. Now, we have this other way of attacking or lowering cholesterol called PCSK9 inhibitors because they block an enzyme in the liver that's responsible for breaking down these receptors that are in the liver that help clear bad cholesterol from the bloodstream. Or, saying this a little bit more simply, because it blocks this, there are more receptors in the liver, so more bad cholesterol can be cleared from a patient's blood stream.

Harjes: Yeah. It feels like a triple negative going on there, but the things that you need to know is that basically, they work differently from statins which is great, because statins don't always work to the fullest extent, and sometimes they're even poorly tolerated by patients.

Campbell: Yeah. As you mentioned, probably 25 million or more people taking statins to help lower or control their cholesterol. Many of these patients are not adequately treated by statins. As a result, those figures you were talking about earlier, there is a connection between cholesterol and cardiovascular events. At least, we're discovering that as we do more and more research into heart disease and stroke. So, anything that we can develop and get on the market and get to patients that lowers cholesterol is a good thing. These drugs, when they came out, Amgen makes one, it's called Repatha, it came out and got approved in August of 2015. Repatha is fast becoming an important drug. The sales are not blitzkrieg sales yet, certainly not treating as many patients as statins are, but there are reasons to think that the use of these drugs is going to climb over time.

Harjes: Right. And a big one of those reasons is that, pretty recently, we found out that Repatha actually reduces cardiovascular risks more than just taking statins alone. This was a huge deal when these numbers came out, because A, they were long-awaited, and B, they're really important to insurers. As of right now, insurers are a little bit dodgy about whether or not they want to cover the cost of this drug. It's expensive, it's $14,000 a year, whereas statins cost hundreds of dollars. There's a tremendous difference in price tag. But, with evidence that Repatha can reduce these risks, many think that insurers will start covering this drug now.

Campbell: Yeah, that was one of the main reasons, right, Kristine, that sales of this drug haven't hit blockbuster levels yet.

Harjes: Which they were largely expected to be.

Campbell: Oh, big time. If you just do the simple math, if you have 25 million people on statins, if even only a fraction of those patients start using a drug that cost $14,000 a year, you're talking about billions of dollars in sales. So, the opportunity is very big, because, now, this study has come out and shown that there is indeed a link to taking this with statins and the ability to reduce cardiovascular events like heart attack and stroke. It's a pretty important finding. There are two drugs on the market right now that are PCSK9s. There's Amgen's Repatha, and there's also another drug called Praluent that's made by Sanofi and Regeneron. But, what investors need to know about that is that Amgen is suing those companies for patent infringement, and so far they are winning.

Harjes: Right. So, Praluent could, essentially, be forced off the market as soon as next month. This is going back and forth and back and forth in courts, but as of right now, it does look like Amgen has the upper hand.

Campbell: Yeah. There's an appeals court decision that will come out they say some time as early as June or as late as December. If Amgen comes out victorious, then Sanofi and Regeneron are either going to have to pull their drug or figure out a deal with Amgen to pay them a royalty stream. Now, I don't know why Amgen would want royalties if they have a drug that already delivers the goods in cardiovascular outcomes. Maybe it'll come down to -- Sanofi and Regeneron are conducting their own study in cardiovascular outcomes -- who had the better outcome in those studies.

Harjes: Right. What's interesting is that we actually don't know the magnitude of the outcome from the Repatha study. We don't have the numbers on that yet.

Campbell: No, and we won't get those until a key industry conference in March. Maybe investors will tune into our show as we get further into spring, and we'll give people an update on what those numbers actually were. We know there was a statistical benefit, we don't know how big that statistical benefit is. And the number, in case you're curious, that people are targeting as being a good number, would be greater than a 20% reduction in those events. If you see that, then it's likely to open up many more patients to qualify for these drugs.

Harjes: Right. And speaking of timelines, the Praluent data, for their long-term cardiovascular risks trial, that study will come out later this year. That's even farther down the road.

Campbell: Right. And what's really interesting is, will that data come out before the appeals court issues their decision or after? That's really going to make things complex for these companies, to figure out how to handle this situation depending on who wins.

Harjes: Yeah. I think that whether or not Amgen decides to go for a royalty largely depends on the outcome of these trials.

Campbell: I agree with that.

Harjes: All right, Todd! We already covered the cholesterol drug market. The next thing we want to talk about on our heart episode is a company called Edwards Lifesciences.

Campbell: This is going to be a stock that not a lot of listeners are going to know about. It's not as well-known as a company like Amgen. But it's still a very important company because it's changing how surgeons treat patients that have narrowing arteries in their heart.

Harjes: Right. Traditionally, that situation is solved with open heart surgery, which is a huge deal. There's some risk involved with it. And while Edwards Lifesciences does have some surgical heart valves that they make, they're also the leader and transcatheter heart valves, which is a non-surgical option.

Campbell: Right. Every once in awhile, we like to play games with our listeners. Let's do a quick game. I know you know the answers, so don't chime in.

Harjes: You don't have to tell them I know! [laughs] 

Campbell: [laughs] All right. How many traditional surgeries are done in the U.S. for aortic stenosis, or narrowing of the heart arteries? Is it 500,000, 1 million, or 1.5 million? Let's give our listeners five seconds ... did everybody get the answers in? It's 1.5 million. There are a lot of patients that unfortunately suffer from this life-threatening situation. Treating many of those patients with open heart surgery is, frankly, dangerous. A lot of these patients are older, they may have other diseases that could make them more at-risk. In many cases, open-heart surgery isn't the best choice. And that's where Edwards Lifesciences comes in, because they get about 50% of their revenue in selling products that are used to treat this condition without having to open up the body or the chest cavity. Instead, they can insert a new valve into a major artery, and then put that into the failing valve, and avoid those complications and risk that comes with the more dangerous surgery.

Harjes: Exactly. Right now, this is a market sized at $2.5 billion for Edwards Lifesciences. But they expect the opportunity here is going to double to greater than $5 billion by 2021, which is not really that far away. They're calling that there's going to be increased awareness of this type of surgery, indication expansion, technological advances, all of these tailwinds that can open up this opportunity even more for them.

Campbell: Right. The smallest portion of the people who are going under this open heart surgery are the ones that are most at risk. As you move that out to intermediate-risk patients, you move that to low-risk patients, you're opening up the addressable market of this approach to so many more people, so many more patients. And that should continue to fuel revenue growth over time. That revenue growth may not be in the 30% to 50% year-over-year rate that we've seen historically with this company, but I would imagine that you're going to continue to see double-digit growth in, at least, procedure rates for this approach over the course of the next five years. If so, then investors could come out nicely rewarded.

Harjes: Right. This is a company that has grown a ton already. There's pretty high expectations for it, too. Back in October, when they reported earnings, they fell quite a bit just because their growth stopped being as big. They went from 23% to 20% year-over-year growth in the quarter they were reporting on, and investors sent the stock downwards just because it was only 20% growth.

Campbell: Right. What's interesting is, investors need to remember, they have these other slow-growing parts of the business that account for 50% of sales. So, if you just break out this fast-growing part of the business, you went from in Q2, year-over-year growth of 49% to $418 million to Q3, 38.5% to $410 million, Q4 up 38% or so to $432 million. So, yes, you're decelerating, but wow, we're still talking about very fast growth for this company. I guess you could say that maybe it was priced to perfection last fall, maybe it's less so priced to perfection now.

Harjes: Yeah. So, interested investors definitely take a look at this one, it's a pretty cool company. Last topic of the day that we wanted to bring up are blood thinners. This is kind of a parallel story to the cholesterol story that we told at the beginning of the show. There's a long-standing blood thinner called Warfarin that's been used for decades as the predominant blood thinner, anticoagulant. But, there's a new class of drugs that are on the market called factor Xa inhibitors.

Campbell: Yeah. This is a much-needed improvement over Warfarin, in my view. Warfarin has been the go-to drug in what's a $10 billion market since the '50s, maybe the '60s. To be able to go in and say, Warfarin requires significant amounts of patient testing and dose adjustment and dietary restrictions because of the way it works -- we can talk about that in a second -- factor Xa inhibitors don't have those same drawbacks or requirements. As a result, doctors are increasingly gaining comfort with them and using them more and more and more. That's translating into billions of dollars in sales for the makers of these drugs: Johnson & Johnson, which makes Xarelto, and Bristol-Myers and Pfizer, which are teamed up on Eliquis.

Harjes: You mentioned Warfarin's mechanism of action. Really, all it does is targets vitamin K, which prevents blood clots. When you mentioned a dietary change for some patients, that's to reduce vitamin K intake for the patient. As you mentioned, it's kind of an imperfect drug, despite having been used for a long time. So, when the factor Xa inhibitors came to market, it was a pretty big deal, and they're definitely picking up steam quickly.

Campbell: Think about that for a second -- the ability for Warfarin to work is dependent on what you had to eat this past week. [laughs] So, yeah, you're looking for something that's going to be, potentially, the same efficacy, less patient burden, and in the case of Eliquis, potentially a better safety profile. As a result, Xarelto sales totaled $2.3 billion last year. That was up 22%. Eliquis sales totaled over $3 billion, and that was up 80%.

Harjes: Yeah, these companies are making a ton of money on these drugs. But, I think the important question to ask is which one has the advantage?

Campbell: In my view, Eliquis, obviously, is being prescribed at a much faster rate. It's growing much quicker, 80% to $3.3 billion is pretty remarkable growth. I believe that the reason behind that is, if you look at the studies that were done in evaluating Eliquis' ability to prevent clots, one of the things they looked at was the risk of bleeds. Because, obviously, if you're preventing blood clots, your blood is getting a little thinner, so if you nick yourself or whatever, theoretically, you could bleed. So, you have these bleeding events that can occur on drugs like Warfarin, Xarelto, and Eliquis. Eliquis showed, in trials, that it works better than Warfarin in reducing the number of bleeds. That's a huge potential safety advantage over these other drugs in the class. As a result, I think that's why this drug is gaining ground so much more quickly. And it's likely to continue to gain ground more quickly than the other factor Xa drugs that are coming to market.

Harjes: Yeah, I would agree. At the recent J.P. Morgan Healthcare conference, the CEO of Bristol-Myers said that they are relatively close to nabbing the lead spot for total prescriptions rankings for this drug, Eliquis, which is already No. 1 in the institutional setting, meaning hospitals, etc, and also among cardiologists. In this scenario, it's also beating out Warfarin.

Campbell: Which is fascinating. Think about how rapidly the use of these drugs has been, and Warfarin still has huge market share.

Harjes: Yeah, they have 54% of patients are still on Warfarin. But a large part of that is because no antidote currently exists and is approved for the factor Xa inhibitors, as opposed to Warfarin which, surprise, you could just take vitamin K and it undoes it.

Campbell: Right. So, you don't want to use these factor Xa drugs, necessarily, in elderly patients who are frail and may be subject to falls, etc, until an antidote gets available. Maybe, Kristine, that's going to happen soon.

Harjes: Yeah, I was going to resist the temptation to talk about one of my favorite stocks on the show, but the conversation has led us there, so I'll just quickly throw it out there that Portola Pharmaceuticals, if you haven't already heard me talk about this stock, is working on developing exactly that antidote.

Campbell: Right. And we don't know if or when it would get approved, but the FDA is considering it. I think a resubmission of the application. If you go back and listen to our shows in the past, we talked about this. But, it would, obviously, be a very big advance for doctors and patients, and it would probably expand the use of these drugs like Eliquis significantly, because now it could get used in more and more patients.

Harjes: Right. And Todd, I know you've written a bunch of articles about this entire market. I have written one or two myself. Listeners, if you're curious, I'm happy to send them to you. Just shoot us an email at Todd, thank you so much for all of the insights today. As always, people on the program may have interests in the stocks that 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. For Todd Campbell, I'm Kristine Harjes. Thanks for listening and Fool on!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.