Halozyme vs. Merck: A Battle Over Subcutaneous Dominance in Oncology Drug Delivery

The pharmaceutical industry’s race to simplify drug delivery continues to collide with high-stakes patent disputes. Halozyme Therapeutics’ April 2025 lawsuit against Merck & Co. over the subcutaneous (SC) formulation of Keytruda (pembrolizumab) highlights the strategic and financial risks tied to intellectual property (IP) in oncology. At its core, the case pits Halozyme’s proprietary MDASE hyaluronidase technology against Merck’s reliance on Alteogen’s ALT-B4 enzyme—a clash with implications for both companies’ future revenue streams and industry-wide subcutaneous drug delivery innovation.

The Technology at the Heart of the Dispute

Halozyme’s MDASE patents, filed between 2011 and 2014, cover engineered hyaluronidase enzymes designed to enable rapid, high-volume subcutaneous drug delivery. These enzymes degrade hyaluronan, a component of connective tissue, allowing large-molecule drugs like Keytruda to be administered via injection rather than IV infusion. This innovation reduces treatment time and improves patient convenience—a critical differentiator in competitive markets.

Merck’s SC Keytruda formulation, developed with South Korean partner Alteogen, uses the ALT-B4 hyaluronidase enzyme. Halozyme alleges that while ALT-B4 was developed independently, its amino acid modifications fall within the scope of its patents, which encompass over 6,700 engineered variants.

The Legal Landscape and Strategic Stakes

Halozyme’s lawsuit, filed in the U.S. District Court for the District of New Jersey, seeks both injunctive relief to block Merck’s SC Keytruda launch and monetary damages, including enhanced penalties for willful infringement. The case hinges on two key factors:
1. Patent Scope: Whether Merck’s ALT-B4 enzyme’s amino acid modifications infringe Halozyme’s MDASE patents.
2. Intent and Prior Knowledge: Halozyme claims Merck was aware of its IP since 2009, when collaboration talks began, yet proceeded without licensing.

Merck has countered by:
- Asserting the lawsuit is “meritless” and that ALT-B4’s sequence is not disclosed in Halozyme’s patents.
- Challenging seven MDASE patents with the U.S. Patent and Trademark Office (USPTO) via inter partes review (IPR).

However, Halozyme’s complaint cites 15 patents, so the USPTO’s review of seven may not fully resolve the case. Meanwhile, the FDA’s decision on Merck’s SC Keytruda application, expected by September 23, 2025, adds urgency. A favorable ruling for Halozyme could block commercialization even if approved.

Investment Implications: Winners and Losers

Halozyme Therapeutics (NASDAQ: HALO)

• Upside: A win would validate Halozyme’s IP strategy, potentially unlocking licensing revenue from Merck (estimated at $100–200 million annually if SC Keytruda achieves 30–40% patient adoption). The case also reinforces Halozyme’s dominance in subcutaneous drug delivery, a $5B+ market by 2030.
• Downside: A loss could embolden competitors to bypass Halozyme’s technology, eroding its licensing moat. However, its ENHANZE® platform (used in 10 commercial products with partners like Roche and Takeda) remains unaffected.

Merck & Co. (NYSE: MRK)

• Upside: A successful SC Keytruda launch could extend Keytruda’s lifecycle beyond its 2028 patent cliff, shielding Merck from generic competition. SC Keytruda’s projected $3–4 billion in annual peak sales would offset declining IV sales and support the company’s oncology portfolio.
• Downside: An injunction would delay or block SC Keytruda’s commercialization, derailing Merck’s strategy to convert 30–40% of patients to the SC formulation by 2028. Keytruda’s Q1 2025 sales of $7.2 billion (46% of Merck’s total revenue) underscore its criticality to the company’s financial health.

Broader Industry Dynamics

The case reflects a growing trend of litigation over drug delivery technologies, which are increasingly pivotal in differentiating therapies. Subcutaneous formulations, such as SC Keytruda, offer significant patient benefits—reducing hospital visits and enabling home administration—but require robust IP protection.

Notably, Merck is not alone in exploring alternatives to Halozyme’s technology. Competitors like AstraZeneca and Daiichi Sankyo are also using Alteogen’s platform, suggesting a broader industry shift toward non-Halozyme solutions. This could pressure Halozyme to aggressively enforce its patents to maintain licensing revenue.

Conclusion: A High-Stakes Crossroads for Both Companies

The Halozyme vs. Merck litigation is a defining moment for both firms:
- Halozyme’s valuation hinges on its ability to monetize MDASE’s IP. With a 22.4% revenue growth rate and 76.5% gross profit margin, the company is financially equipped to pursue litigation while its ENHANZE® program continues to generate cash.
- Merck’s oncology dominance depends on SC Keytruda’s success. A delayed launch could accelerate erosion of Keytruda’s market share, particularly as competitors like Roche’s Tecentriq and AstraZeneca’s Imfinzi gain ground.

Investors should monitor two critical milestones:
1. FDA Approval (September 2025): A green light for SC Keytruda would pressure Merck to resolve the lawsuit swiftly, possibly via settlement.
2. Legal Rulings on Injunction Requests: A preliminary injunction before the FDA decision could force Merck to pivot, while a denial might embolden Halozyme to seek higher damages.

The outcome could reshape the subcutaneous drug delivery landscape, influencing licensing agreements, R&D priorities, and the profitability of blockbuster oncology drugs. For now, the battle underscores a simple truth: in biopharma, owning the delivery mechanism can be as valuable as the drug itself.