Piper sees GLP-1s increasing demand for knee/hip surgeries near-term (NYSE:NVO)

Piper Sandler stated it expects upcoming outcomes from a Novo Nordisk (NVO) research of its weight-loss drug semaglutide within the therapy of osteoarthritis to be “mediocre” and demand for knee and hip replacements to extend near-term as extra sufferers qualify for surgical procedure because of weight reduction.

The funding financial institution stated in a latest observe that the Novo Nordisk Section 3 research, known as STEP 9, will possible present that some osteoarthritis sufferers who took semaglutide felt much less joint ache because of lowered pressure on their joints. Nonetheless, it doesn’t consider the outcomes would have a near-term internet impression on knee replacements because the drug wouldn’t reverse current harm and movement issues are a serious purpose why such surgical procedures are performed.

Novo Nordisk markets semaglutide below the model names Ozempic for diabetes and Wegovy for weight reduction. The drug belongs to a category of medicines often known as GLP-1s.

STEP 9 has been evaluating semaglutide within the discount of osteoarthritis ache in folks with weight problems. Piper stated topline outcomes from the research, which has 407 sufferers, had been anticipated in October, however now look extra possible in Q1 2024.

The financial institution stated that whereas the STEP 9 research most likely received’t result in an expanded label for semaglutide, it helps lay the muse for added research for semaglutide and/or maybe one other GLP-1 drug.

What impression the recognition of semaglutide would have on the medical system business has been debatable. Some have argued {that a} slimmer inhabitants would want fewer joint replacements because of lowered pressure on the joints. Others level out that extra folks would qualify for surgical procedure in the event that they misplaced weight, plus thinner folks would possible be placing extra stress on their joints by way of elevated exercise, which in flip would improve demand.

Piper sees the longer term yielding combined outcomes. The funding financial institution sees weight reduction medication resulting in increased demand for replacements of weight-bearing joints reminiscent of knees and doubtless hips till round 2040 as extra folks with current joint harm would qualify for surgical procedure. Corporations positioned to profit from that pattern would come with Stryker (NYSE:SYK) and Zimmer Biomet (NYSE:ZBH).

Extra particularly, the financial institution sees a roughly 10% improve in knee and hip procedures within the subsequent 7 to 10 years because of increased BMI sufferers dropping sufficient weight to qualify for surgical procedure. After round 20 years, Piper sees a slowdown within the mid-teens as sufferers incur much less joint harm because of weight.

Piper notes that the shares of orthopedic firms reminiscent of OrthoPediatrics (KIDS) and Paragon 28 (FNA) have been below strain partly because of GLP-1 issues despite the fact that they possible wouldn’t be impacted. OrthoPediatrics is a maker of orthopedic units for kids, for which GLP-1 meds are usually not authorized, whereas Paragon 28 makes units for ft and ankles, that are usually extra affected by movement than weight.

“We perceive that these small caps are additionally being impacted by the present rate of interest setting however consider their valuations are compelling at current,” Piper added.

Pipers has chubby scores on KIDS, FNA, SYK and ZBH.