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Piper Sandler mentioned it expects upcoming outcomes from a Novo Nordisk (NVO) examine of its weight-loss drug semaglutide within the remedy of osteoarthritis to be “mediocre” and demand for knee and hip replacements to extend near-term as extra sufferers qualify for surgical procedure as a result of weight reduction.
The funding financial institution mentioned in a latest notice that the Novo Nordisk Section 3 examine, known as STEP 9, will probably present that some osteoarthritis sufferers who took semaglutide felt much less joint ache as a result of diminished pressure on their joints. Nonetheless, it doesn’t consider the outcomes would have a near-term internet affect on knee replacements because the drug wouldn’t reverse present injury and movement issues are a significant cause 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 mentioned topline outcomes from the examine, which has 407 sufferers, had been anticipated in October, however now look extra probably in Q1 2024.
The financial institution mentioned that whereas the STEP 9 examine in all probability received’t result in an expanded label for semaglutide, it helps lay the inspiration for extra research for semaglutide and/or maybe one other GLP-1 drug.
What affect the recognition of semaglutide would have on the medical machine business has been debatable. Some have argued {that a} slimmer inhabitants would want fewer joint replacements as a result of diminished 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 probably be placing extra stress on their joints by way of elevated exercise, which in flip would improve demand.
Piper sees the long run yielding blended outcomes. The funding financial institution sees weight reduction medicine resulting in greater demand for replacements of weight-bearing joints equivalent to knees and doubtless hips till round 2040 as extra folks with present joint injury would qualify for surgical procedure. Corporations positioned to learn from that development 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 as a result of greater BMI sufferers shedding 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 injury as a result of weight.
Piper notes that the shares of orthopedic firms equivalent to OrthoPediatrics (KIDS) and Paragon 28 (FNA) have been below stress partially as a result of GLP-1 issues though they probably wouldn’t be impacted. OrthoPediatrics is a maker of orthopedic gadgets for kids, for which GLP-1 meds will not be permitted, whereas Paragon 28 makes gadgets 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 obese scores on KIDS, FNA, SYK and ZBH.
