Merck Faces Patent Battle Over Keytruda’s Subcutaneous Future

A high-stakes patent dispute has emerged between merck & Co. (MRK) and Halozyme Therapeutics, threatening to disrupt the next phase of growth for Keytruda, Merck’s blockbuster cancer drug. The lawsuit, filed in April 2025, centers on Merck’s proposed subcutaneous formulation of Keytruda, which could be delayed or derailed if Halozyme prevails. Here’s what investors need to know about the legal battle, its implications for Merck’s pipeline, and the risks and opportunities ahead.

The Lawsuit: Halozyme’s Claims and the Stakes for Merck

Halozyme alleges that Merck’s subcutaneous Keytruda infringes on patents related to its MDASE technology, a proprietary enzyme-based system designed to accelerate drug delivery via subcutaneous injection. The lawsuit, filed just as Merck seeks regulatory approval for the formulation, seeks both damages and an injunction to block its commercial launch. Halozyme argues that Merck knew of its patents but proceeded without a license, potentially exposing itself to “willful infringement” claims—a designation that could trigger enhanced damages under U.S. law.

The subcutaneous version of Keytruda, which completed Phase 3 trials, promises to reduce infusion time from hours to minutes, improving patient access and convenience. Analysts estimate the formulation could add $2 billion to $3 billion in annual sales for Merck, given its potential to expand Keytruda’s market share. However, if Halozyme’s lawsuit succeeds, Merck could lose this growth driver entirely, along with facing financial penalties.

Why the MDASE Technology Matters

Halozyme’s MDASE patents are distinct from its ENHANZE® licensing program, which already generates revenue from partnerships with companies like Pfizer and Roche. This separation means the lawsuit does not directly jeopardize Halozyme’s existing collaborations. Instead, it focuses solely on Merck’s alleged use of unlicensed technology.

The innovation in question involves over 7,000 modifications to human hyaluronidases, enzymes that break down hyaluronan in connective tissue, enabling rapid drug absorption. Halozyme claims its modifications created a “roadmap” for optimizing enzyme stability and activity—a proprietary process it argues Merck copied. If proven, this could weaken Merck’s defense, as the technology’s specificity suggests intentional infringement.

Merck’s Position and Market Impact

Merck has not yet publicly addressed the lawsuit, but its silence underscores the complexity of the case. Keytruda’s sales totaled $7.21 billion in Q1 2025, a 4% year-over-year increase, despite growing competition from rival checkpoint inhibitors. The subcutaneous formulation could be critical to maintaining that momentum, as it simplifies administration and opens new distribution channels.

However, the lawsuit’s timing is precarious. If Merck cannot secure a license or win the litigation before the FDA’s expected approval (anticipated in late 2025), it risks delaying the subcutaneous launch—a setback that could cost hundreds of millions in lost revenue.

The Legal Landscape and Investment Risks

Patent cases are inherently uncertain, but Halozyme’s claims carry weight. The MDASE patents were filed as early as 2011, giving them substantial legal standing. Merck’s awareness of Halozyme’s intellectual property, as noted in the lawsuit, raises the specter of willful infringement, which could amplify damages.

Investors should also consider Merck’s financial resilience. With $51 billion in cash and equivalents and a diversified portfolio (including new drugs like the diabetes treatment Ozempic), the company could withstand a settlement or damages. However, the loss of subcutaneous Keytruda’s growth potential would pressure long-term earnings estimates, particularly as Keytruda’s sales are expected to peak at $18 billion by 2027.

Conclusion: A High-Risk, High-Reward Crossroads

The lawsuit poses a material risk to Merck’s near-term growth trajectory but does not threaten its core business. While Halozyme’s case is compelling, Merck’s resources and the possibility of a negotiated settlement (e.g., a licensing agreement) could mitigate the worst-case scenario.

Investors should monitor two key developments:
1. Legal Proceedings: A ruling on Halozyme’s motion for an injunction could come within months, potentially derailing Merck’s launch plans.
2. Competitor Activity: Rivals like Roche (RHHBY) and AstraZeneca (AZN) are advancing their own subcutaneous checkpoint inhibitors, adding urgency to Merck’s need to bring its version to market.

In the near term, Merck’s stock may face pressure, but its fundamental strength and diversified pipeline should limit downside. A resolution in Merck’s favor—or a settlement—could unlock significant upside. For now, this patent clash remains a critical test of Merck’s ability to protect its innovation—and investors’ returns.

The verdict here could redefine not just Keytruda’s future, but the broader landscape of drug delivery innovation—a stakes game where billions hang in the balance.

Ask Aime: What's next for Merck's Keytruda after the Halozyme Therapeutics lawsuit?