This past month, a Chinese researcher revealed that he used CRISPR (NASDAQ:CRSP) gene editing on human embryos and that the mother has now successfully given birth to twins. These twin girls will go down in history as the world's first genetically engineered babies. He conducted the experiment to knock out a specific gene that would make the girls resistant to the HIV virus (because their father was HIV positive), believing the genetic modification could prevent the disease from being transmitted during the pregnancy.

While the girls appear to have been born healthy, the experiment has sparked an incredible amount of controversy. Genetically modifying human embryos is illegal in the U.S., Europe, and China. Dr. He Jiankui is under investigation, and many believe he could be heading to jail. But the twins have been born, so Pandora's Box is open and there's no turning back. Will CRISPR eventually transition from being considered outrageous to being ethically acceptable -- just as in-vitro fertilization has transitioned during the past four decades? Or will this experiment have huge negative ramifications that will forever scar the scientific community?

In the following video, Industry Focus: Healthcare host Shannon Jones and guest Simon Erickson take an in-depth look at the science behind "designer babies" and its potential long-term impacts. 

A full transcript follows the video.

This video was recorded on Dec. 13, 2018.

Shannon Jones: Let's talk a little bit more on the topic of transparency and risk. For many of the healthcare investors that listen to this show, I'm sure your news feed has been slammed with news about designer babies. Simon, designer CRISPR babies. [laughs] What do you say to all of this?

Simon Erickson: Holy, cow! This is opening Pandora's box, Shannon. This is a science that has been around technically since the mid-90s. That's when the first abstracts and papers were coming out for what became CRISPR. It's basically gene editing. You're taking the DNA strand, you're snipping out small pieces of it, and you're removing or editing genes.

In terms of the science itself, the reason I say this is Pandora's Box being opened is because the name He Jiankui, scientist in China, has now not only genetically engineered a human embryo, but the mother actually gave birth to twins with this genetically engineered embryo. We have a genetically engineered baby that has been born. This is not just animal testing anymore. This is now very much more real than just the lab work that was being done before. This is now a science that can be incredibly innovative, incredibly progressive, and prevent a lot of genetic diseases, but that's counterbalanced because this is also a very controversial question. It's not black or white. It's not a good or a bad thing, but a lot of people are taking opposition to what's being done and questioning whether or not it was even legal for this scientist to do this in the first place.

Jones: Exactly. I believe he was actually Stanford trained, and as you mentioned, went back to China to go back and build up biotech, build up some companies there. With this CRISPR, one of the advantages of using CRISPR is that it really is a do-it-yourself kit. We even have high school students that are doing experiments with CRISPR at their schools, which is kind of insane to me. The ease of access, the ease of use of CRISPR is so intriguing. You can see it applied in many different applications. You can see it in agricultural biotech. You can also see it being used, and it's starting to be tested, here in the U.S. on human trials, not for germline editing, but for certain diseases that are occurring in adults.

One of the interesting things with this designer baby story -- it seems like new headlines come out every day -- it sounds like he was able to actually go in and do what he intended to do, or at least halfway. Basically, what he was attempting to do was to make these babies resistant to HIV, the virus that causes AIDS. Basically, the way he wanted to go about it was disabling a gene called CCR5. He was able to disable the gene in one of the little girls who was just born. But, it was interesting, because in the other little girl -- of course, we get two copies of every gene -- only one copy of that CCR5 gene was actually disabled. The other was not. So, the question is, is she actually resistant to HIV?

Also, CCR5 is a mutation that already exists. There are adults that are HIV-resistant in the world now. What's so interesting about that is that they're actually more vulnerable to diseases like West Nile virus, even seasonal flu. So now, you've got an immune system that is out of whack. We don't know what will happen long-term. When these children grow up and become adults and parents and have kids, this will pass on to their kids. And we don't know what that will look like.

For this scientist, who kind of did this in secrecy, nobody really knew about it until they came out at a conference and said, "Hey, guys, I just did something incredible," I think there's going to be a lot more questions than there are answers in regard to what happens with this. I do know that China actually came out and banned germline editing. Of course, it's illegal here in the U.S. China finally came out and banned it...but, there's no actual enforcement arm in China. As we talked about with regulatory infrastructure, they don't have a way to really monitor this. So, this is something that could continue to happen. This could be a potential downside, especially if you hear about off-target effects that happen in other trials in China, as well.

Erickson: It's a huge question mark. Like you said, it is prohibited in China legally. But people are speculating that the Chinese government might have given Dr. He special permissions to do these experiments. You haven't seen anything solid as far as prosecution of what's going to happen from this. It's an investigation that's undergoing right now.

You're also seeing some of the leading IP researchers, such as Feng Zhang down the Broad Institute in Boston, calling for a moratorium on a lot of the IP that he's created for CRISPR, saying, "Hey, there are risks we don't know about that might happen from this." Just like you mentioned about CCR5 potentially having babies more susceptible to West Nile virus. There are still off-target mutations. Even if it does work correctly, what's going to be the unintended consequences of this? And, of course, you've got the slippery slope argument. What's OK and what's not OK? I think it's going to be very difficult. In fact, I've never even heard of a globally agreed-upon framework for what is permitted and what is not permitted ethically in scientific discoveries like these. It's going to be hard to say, "This is OK, but we're not going to do this. This is a medical necessity vs. this is a designer baby." There's a lot of gray area there in the middle that is, I think, going to halt the adoption.

But I will counteract all of that, Shannon, if I can say one other thing on this subject, which is, if we go back to the year 1978 and we look at in vitro fertilization, this was something that was hugely controversial in London, when the first baby was born from an embryo that was fertilized in vitro, outside of the womb. Then the baby still came out totally normal. But this was being called the greatest threat to society since the atomic bomb at the time, and the mother that actually delivered the baby in London had to use an assumed identity because of the outrage from the public about this. Of course, course IVF has caught on since then. The creator won a Nobel Prize in 2010. There's now eight million babies that have been born IVF in the world for something that was hugely controversial 40 years ago.

So, I think that, as I've said, we've opened Pandora's box. There's a lot of controversy around gene editing today. I'm not certain that that same level of controversy is going to be there even five or 10 years into the future.

Jones: Yeah, fair enough. I think that's a very good point. Before we dive into a couple of stocks that we think are worth watching, Simon, would you say holistically for, let's say, the average investor out there who's maybe considering investing in Chinese biotech, what would be your words of wisdom to that person?

Erickson: The biggest thing is, science is still going to win at the end of the day. We can be excited about China's population that needs good medicines out there. We can be excited about the people that are coming on board, and the companies that are being created, and the policy. All of that stuff is very good in terms of supporting what is still founded upon good science. At the end of the day, the most important thing is that you have really effective drugs that are based upon good technology and good science that are curing or treating these very serious diseases.

The takeaway for investors is, there are going to be a lot of headlines that you're going to see that contain that sizzle and the buzz and the excitement around what's going on in China. But at the end of the day, we still need to look at the data from those readouts that are presented from these trials and see how that's compared against the standards of care that have been used for decades in westernized countries. It's a great opportunity, but still, data is going to prove how this shakes out at the end of the day.

Jones: That's right. It all comes down to data. I would add, until the Chinese infrastructure and the regulatory reforms are really in place and we can trust it, for me, it's just making sure that if they're running trials in China, how easy is it for them to set up a trial in the western market, run those trials, and then be able to reproduce the same clinical results that they saw in China? I want to see more U.S.-based trials. From there, assuming it's a good opportunity, it's an innovative approach, and the company's management team is clear and transparent, you might be on the right track.