At the recent annual American Society of Hematology (ASH) conference, Celgene (CELG) reported trial results for the multiple myeloma CAR-T drug it's making with bluebird bio (BLUE 1.78%), bb2121.

In this clip from Industry Focus: Healthcare, analyst Kristine Harjes and contributor Todd Campbell explain what the drug does and why it's so exciting for patients and investors, how bb2121 is different from its competition, a few things that investors should know about Bluebird Bio before buying in, why this partnership between Celgene and Bluebird is perfect for both companies, and more.

A full transcript follows the video.

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This video was recorded on Dec. 13, 2017.

Kristine Harjes: So, we got some very exciting news from several different CAR-T developers at ASH, but the first one we want to talk about today was the partnership between bluebird bio and Celgene on a drug called bb2121 that reported some absolutely incredible numbers in heavily pretreated multiple-myeloma patients.

Todd Campbell: Right. We talked about this on the show back in June, Kristine, when they made a presentation on early stage phase 1 results, and just a handful of multiple-myeloma patients for this CAR-T therapy they're working on called bb2121. They updated the data from that trial at ASH, and wow. Once again, six months later, steals the show, delivering incredibly high overall response rates and complete response rates in a patient population that's frankly in dire need of new treatment alternatives. The specific numbers, for those keeping score at home, there was a 94% overall response rate to bb2121, and that was across 21 patients. On average, those patients had already tried and either didn't respond, or failed to respond, to seven previous therapies. So, you're talking about a 94% response rate in a patient population that has really, I don't want to say run out of options, but their options have become extremely limited given how many prior therapies they've taken.

Harjes: Right. These numbers, as you said, are absolutely stunning. The complete response rate was 56%. For reference, that is quite a bit for this population. In comparison, Johnson & Johnson won approval for their drug, Darzalex, with an overall response rate of 20% and a 3% complete response rate. Meanwhile, this is a drug that has annual[ized sales] of over $1 billion. So, if you compare that to the numbers that we're seeing -- in early stages, but still in fairly robust numbers -- for bb2121, and it's easy to see why investors are getting very excited. They sent the stock up about 15% over the past week. I believe that even after bluebird announced they were going to raise some money by offering new stock yesterday, which should raise them about $600 million before expenses, which is not surprising at all. This is very common, especially for clinical-stage companies, to do after releasing positive data that sent the stock up.

Campbell: Yeah, absolutely, it's a cheap way to get financing to do all sorts of great things, and what it really does is bolster this company's balance sheet. We mentioned at the beginning of discussing this drug that there's a relationship there with Celgene. Celgene has the license to bb2121, but bluebird bio can actually opt in, exercise an option, that will allow it to co-market and co-commercialize bb2121 in North America. I think that's one of the reasons that they're trying to shore up the balance sheet, so they have plenty of cash so they can exercise that option and then share in the spoils if bb2121's pivotal trial pans out as well as these early findings, and the FDA goes ahead and grants approval of it. It's a major market indication, it's ripe for disruption. The kind of numbers that we're seeing in the space are incredibly dramatic. We're getting the cart in front of the horse here, but I look at this and I say, the typical blueprint for developing multiple-myeloma drugs has been, we can get to market fastest if we go for these heavily pretreated patients. The FDA will expedite our review and we'll get on the market faster, then we can conduct studies in earlier lines of therapy that will allow us to treat more and more patients. So, you look at these response rates and start thinking into the future, and you're not really thinking about bb2121 just as a fourth-line multiple-myeloma treatment. You're thinking about the potential for it to disrupt the third line, the second line, who knows, the first-line treatment to someday. And since we're talking about an indication where you have multiple multibillion drugs on the market already, there's reason for excitement. It's understandable.

Harjes: And Celgene is a fantastic partner for bluebird to have. They have so much experience in this market already. They pretty much dominate the indication with Revlimid for the first line -- and the second line as well -- which makes about $8 billion per year. They have Pomalyst in the third line, which is about a $1.6 billion-per-year drug. So, even though 2121 would probably start out as a fourth-line drug, as you mentioned, and potentially work its way up, the companies are also working on developing a next-generation version of this drug, called 21217, which could hopefully be Revlimid's successor someday. So, really big potential for these drugs, and again, kind of early stage, but it's not hard to see why investors were so excited about this news.

Campbell: Yeah, there have been a lot of conversations about Celgene and potential patent exposure when Revlimid's patents end, and possibly getting some competition in there against Revlimid over the course of the next decade or so. I think this shows you what Celgene's strategy could be for maintaining its moat in this indication. As you mentioned, they get about $10 billion per year in revenue from multiple myeloma. That's a lot of their sales. So, they want to make sure they are the dominant player. bb2121 could theoretically allow them to do it. As an investing show, our listeners are probably wondering, what are the implications? Does this mean that bb2121 cannibalizes Celgene's Revlimid and Pomalyst sales? Or are other drugs impacted? My personal opinion is, no, not yet. Pomalyst is getting studied for second-line use, so it's trying to move up into earlier-stage treatment. I think initially, maybe the ones that are most threatened by a bb2121 potential commercialization (my guess: 2019 would be the earliest that you can see that) would be Darzalex, which we mentioned, it's a Johnson & Johnson drug, Amgen's Kyprolis, and possibly Bristol-Myers' Empliciti. Those drugs are also trying to migrate further into earlier-stage treatment, but they still generate a pretty good amount of their sales in the later lines.

Harjes: Yeah, absolutely. One other thing to keep in mind about bluebird is, this isn't all to their story. At their conference, they also released updates on their treatments for beta-thalassemia and sickle cell disease. But, the 2121 news is certainly what has caused the stock to jump. If you look at the company as a whole, they have tripled in value in the past year, which is pretty nuts. It's evidence of the great work that they're doing. Their market cap now stands at $8.4 billion. That holds a lot of hope, and they do have the robust pipeline to support that.