Dutch court bars Merck from selling subcutaneous Keytruda in eight EU markets, favoring Halozyme

What happened

A Dutch court ruled in favor of Halozyme Therapeutics, barring Merck from selling its subcutaneous formulation of Keytruda in eight European markets, dealing a legal setback to a key defensive strategy for its top-selling drug. Merck had secured EU approval for subcutaneous Keytruda in November 2025, positioning the injectable version as a convenience advantage to preserve market share ahead of anticipated biosimilar competition and IRA pricing pressures. The ruling appears to hinge on Halozyme's ENHANZE drug delivery technology patents, meaning Merck may now face either a redesign of its formulation, a licensing agreement, or a prolonged legal battle. This development adds a new headwind to Merck's Keytruda franchise, which already accounts for 49% of company sales and is facing a two-step decline from biosimilars and government price setting beginning around 2028–2029. Halozyme emerges as the clear beneficiary, with potential to secure royalties or force Merck to abandon its subcutaneous ambitions in those markets.

Implication

The ruling directly undermines Merck's strategy to use subcutaneous Keytruda as a competitive moat in Europe, potentially reducing its ability to defend market share and pricing against future biosimilars. Merck may need to either license Halozyme's technology or redesign its formulation, incurring additional costs and delays that could erode margins and give competitors an opening. The setback could accelerate a shift back to intravenous Keytruda, but that form already faces earlier biosimilar exposure, so the overall franchise risk increases. Investors should monitor Merck's response and any adjustments to EU revenue guidance, especially since the deep value report already identified Keytruda concentration as the primary risk to the investment thesis. Halozyme's stock is likely to re-rate upward as this ruling validates its ability to enforce patents against large pharma companies, and it may unlock new licensing opportunities.

Thesis delta

The legal setback materially weakens the bull case for Merck's Keytruda lifecycle management, as the subcutaneous formulation was a key tactic to mitigate post-2028 revenue declines. It increases uncertainty around European sales and could force costly licensing or redesign, pushing the risk-reward balance of the WAIT rating further toward the bear case. While other factors such as Gardasil China weakness and generic headwinds remain, this ruling adds a new, concrete negative that investors must price in.