Halozyme vs. Merck: A Patent Battle Over Billions in Subcutaneous Drug Delivery

The pharmaceutical industry is no stranger to high-stakes patent disputes, but few cases in recent years rival the implications of Halozyme Therapeutics’ lawsuit against Merck & Co. over the subcutaneous formulation of Keytruda, Merck’s blockbuster cancer drug. At its core, the legal battle centers on Halozyme’s claim that Merck’s subcutaneous Keytruda infringes its patents for a revolutionary drug delivery technology. The outcome could reshape Merck’s growth trajectory, redefine Halozyme’s valuation, and set precedents for IP enforcement in biopharma.

The Dispute: Patents, Hyaluronidases, and $Billions at Stake

Halozyme filed its lawsuit in April 2025 in the U.S. District Court for the District of New Jersey, alleging that Merck’s subcutaneous Keytruda formulation violates 15 patents under its MDASE (Modified Dermal Absorption Enhancing) patent family. These patents cover modified human hyaluronidases—enzymes that break down hyaluronan in connective tissue to enable rapid drug absorption via subcutaneous injection. Halozyme asserts that Merck’s enzyme, berahyaluronidase alfa (ATL-B4), incorporates amino acid modifications explicitly claimed in its patents, even though ATL-B4 itself was developed independently by Merck’s partner, South Korean firm Alteogen.

The lawsuit seeks two major remedies:
1. An injunction to block Merck from commercializing subcutaneous Keytruda.
2. Monetary damages, including potential enhanced damages for willful infringement, as Halozyme claims Merck knowingly proceeded without a license despite prior negotiations dating back to 2009.

Why This Matters: Keytruda’s Lifeline and Halozyme’s IP Gamble

Merck’s subcutaneous Keytruda is not merely a product update—it’s a critical lifeline for its top-selling drug. The original IV formulation faces a patent cliff in 2028, and the subcutaneous version aims to convert 30–40% of patients from IV infusions to 2-minute injections within two years. Analysts estimate this could add $2–$3 billion annually in sales, shielding Merck from generic competition and sustaining Keytruda’s dominance in the checkpoint inhibitor market.

For Halozyme, the lawsuit is a high-risk, high-reward play to monetize its R&D investments. While its existing ENHANZE® licensing program (used by partners like Roche and Pfizer) generates steady revenue, the MDASE patents represent a separate frontier—one with potentially vast unlicensed markets. Halozyme’s CEO, Dr. Helen Torley, has framed the case as a defense of “years of innovation” that “could redefine patient care.”

The Legal and Financial Crossroads

The case hinges on three critical timelines and risks:

1. FDA Approval Decision (Sept. 23, 2025):
   If approved, Merck plans to launch subcutaneous Keytruda by year-end. However, Halozyme’s injunction request could delay or block this launch.
   

2. Willful Infringement Claims:
   If proven, Merck could face triple damages under U.S. patent law, potentially costing billions. Current estimates suggest enhanced damages could reach $2 billion+ annually if Halozyme wins.

3. Merck’s Patent Challenges:
   Merck has already petitioned the U.S. Patent and Trademark Office to invalidate seven of Halozyme’s MDASE patents. While this process is separate from the lawsuit, a favorable ruling could weaken Halozyme’s position.

Winners and Losers in the Outcome Scenarios

Scenario	Halozyme (HALO)	Merck (MRK)
Halozyme Wins Injunction	Stock surges; licensing deals may follow.	Subcutaneous launch delayed; lost revenue.
Merck Prevails in Court	Stock dips; IP portfolio devalued.	Maintains growth path; retains $billions.
Settlement Reached	Secures licensing fees; avoids prolonged litigation.	Avoids injunction but pays royalties.

Market Dynamics and Investor Considerations

• Halozyme’s Upside: Analysts at GuruFocus project a 37.24% upside potential for Halozyme’s stock (HALO) based on its patent portfolio’s value. A victory could also open doors to broader licensing agreements.
• Merck’s Resilience: While Keytruda sales grew to $7.2 billion in Q1 2025, Merck’s diversified portfolio (e.g., Ozempic, Gardasil) buffers against immediate shocks. However, long-term risks remain if subcutaneous Keytruda is blocked.
• Competitor Pressure: Rivals like Roche (Tecentriq) and AstraZeneca (Imfinzi) are advancing their own subcutaneous checkpoint inhibitors, adding urgency for Merck to secure its position.

Conclusion: A Watershed Moment for Biopharma IP

The Halozyme vs. Merck lawsuit is more than a legal battle—it’s a defining test of how pharmaceutical companies protect and monetize drug delivery innovations. With $2–3 billion in annual sales at stake for Merck and Halozyme’s stock riding on patent validity, the stakes are existential for both.

Crucially, the FDA’s September 2025 decision and the court’s ruling on Halozyme’s injunction request will be pivotal. A win for Halozyme could delay Merck’s launch, eroding Keytruda’s post-2028 growth and boosting Halozyme’s valuation. Conversely, a Merck victory would cement its market dominance but cast doubt on Halozyme’s IP strategy.

Investors should monitor:
- Halozyme’s stock performance as litigation unfolds.
- Subcutaneous Keytruda’s FDA fate, which could trigger volatility in both stocks.
- Negotiations for a licensing deal, which might avert a prolonged legal battle.

In the end, this case underscores a broader truth: in biopharma, owning the delivery mechanism can be as valuable as the drug itself. For now, the needle is with the courts—and the stakes have never been higher.