The prospect of deleting gene mutations or inserting code into DNA to address genetic diseases is exciting, but questions remain for gene-editing approaches. Delays and concern over off-target impacts took a toll on investor optimism, but ultimately, the launch of trials in humans means gene editing took an important step forward in 2018.

In this segment from Industry Focus: Healthcare, analyst Shannon Jones and Fool.com contributor Todd Campbell discuss what happened with gene editing in 2018.

A full transcript follows the video.

This video was recorded on Dec. 12, 2018.

Shannon Jones: Let's dive into top story No. 4, and that's related to gene editing. For our listeners, for investors out there, gene editing headlines likely have filled your news feeds over the past year or two, some for good reasons, some for not-so-good reasons. The promise and hype of gene editing, being able to actually go to the underlying cause of disease and correct it before the disease even starts, has been a huge opportunity, obviously a ton of investor enthusiasm. But what we saw in 2018 is that, like any other biopharmaceutical asset, there are going to be setbacks. Todd, we saw that here with gene editing.

Todd Campbell: Yeah, and that caused stutter steps. There are 6,000 genetic diseases. They affect about 350 million people worldwide. And a lot of those genetic diseases don't have any treatment options available. The whole idea of being able to go in and delete a piece of DNA or insert a piece of DNA that can change the way that we're producing proteins to fix or address these genetic diseases, is really exciting. But, again, stutter steps in 2018.

The first big stumble for CRISPR, which is one of the main approaches for gene editing that's gotten a lot of attention, happened in May, when the FDA put a hold that delayed the start of a human clinical trial of Vertex and CRISPR Therapeutics' (NASDAQ:CRSP) CRISPR gene editing approach in patients with sickle cell disease. That happened in May.

Then, in August, some optimism got renewed because Vertex and CRISPR were allowed to start human trials for beta thalassemia, which was the first time a U.S. company won an OK to start in human trials for that gene editing approach. Then, the clinical trial got lifted up in October, again, adding a little bit more enthusiasm for it. And in November, Editas, which is CRISPR Therapeutics' competitor, they actually won FDA approval to start their human trials for a rare genetic disease that involves the retina. For CRISPR, it's been like that, "OK, we're taking some steps forward, we're taking some steps backward. We want to make sure we get everything correct, because we want to make sure that we don't run the risk of having off-target gene editing happen." Basically, that's where you've got all these repeats of genetic sequences in the body, we want to make sure we're only getting the one we want to be edited. So, I think some caution is warranted. But, yeah, that created some stutter steps for that approach.

Jones: You mentioned the off-target effects. Thinking about that, there are some studies that have been running that could indicate the increased risk of cancer associated with the CRISPR-Cas9 system. Something to watch. May not necessarily be a deal breaker, especially if it gets approved for many fatal diseases where there's a huge unmet need, but certainly puts a damper on commercial viability, if that is the case.

Also, from a CRISPR perspective, there are studies that show that our immune system may actually not work well with CRISPR. There are some studies that said CRISPR may not work in some patients, and then, even those that it does actually work in, it may actually elicit a response stronger than is necessary. So, there could be some safety effects.

I think, all in all, though, as we see these first human trials get up and running, and we start to see and hear about their pathway to approval, you can expect that regulators will be all over these companies. You can expect getting through to approval will be scrutinized.

Campbell: Yeah. It's really early innings for the CRISPR-Cas9 style approach to gene editing. Not so much early innings for Sangamo's zinc finger nuclease approach. Studies have been going on since early 2000s for that approach. Actually, in September, they were dealt a blow when they reported disappointing results for a gene editing approach targeting Hunter syndrome. That also dampened some of the enthusiasm for gene editing.

For CRISPR-Cas9, yeah, kind of early innings. Who knows when we'll finally actually get some late-stage trial to digest? It won't happen in 2019, though, that's for sure.

Jones: Yeah, I think the earliest we might start to see some data is maybe 2020 there. Certainly, something to keep an eye on.

Shannon Jones has no position in any of the stocks mentioned. Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool owns shares of CRISPR Therapeutics. The Motley Fool recommends EDIT and VRTX. The Motley Fool has a disclosure policy.