Merck is racing to defend its top revenue driver ahead of a looming patent cliff, but a legal setback just threw a wrench in its plans.

Following a ruling by a Dutch court in a case brought by Halozyme Therapeutics, Merck is barred from selling an injectable form of its blockbuster cancer therapy, Keytruda, across eight European markets: Belgium, Denmark, France, Ireland, Italy, the Netherlands, Sweden, and Switzerland.

The dispute hinges on Halozyme's MDASE technology, which uses engineered enzymes that allow high-volume biologic drugs to be injected under the skin more quickly than intravenous infusions.

A specialized Hague patent court determined that subcutaneous Keytruda infringes on Halozyme's MDASE patent EP622, also rejecting Merck's claim that the patent was invalid.

Mike Snyder, Halozyme's chief legal officer, said Wednesday that the ruling was a validation of the company's MDASE platform, which was developed "through years of rigorous research."

The lawsuit is part of an ongoing legal campaign against Merck. Halozyme won a preliminary injunction in December to block the launch of subcutaneous Keytruda in Germany, while additional patent infringement lawsuits are pending in U.S. federal court.

Merck told Barron's it strongly disagrees with the Dutch court's ruling, reiterating its stance that the patent is invalid globally and the infringement claim is meritless.

"We are evaluating next steps but are confident in our overall legal position and believe that, ultimately, we will prevail in the courts," the company said.

Investors shrugged off the ruling. Merck gained 1.2% on Wednesday, while shares of parent Merck KGaA also rose in Germany. Halozyme, meanwhile, gained 1.5%.

The setback complicates Merck's effort to protect its most crucial franchise ahead of a loss of exclusivity in 2028, at which point "copycat" biosimilar drugs are expected to flood the market.

The subcutaneous formulation, approved by U.S. regulators last September, offers easier administration for older and less mobile patients and won't be subject to biosimilar competition.

Halozyme clarified Wednesday that patients will still have access to the Keytruda injection, which isn't covered by the patent.

When conventional methods fail, drugmakers often resort to litigation to slow down competitors. In July, Novo Nordisk sued Eli Lilly in U.S. federal court, alleging its rival's advertisements for weight-loss drugs mislead consumers as Lilly continues to pull ahead in the market.

That isn't exactly the case here. Halozyme doesn't manufacture a direct competitor to Keytruda, specializing instead in drug delivery systems themselves. However, the company licenses its technology to several of Merck's competitors in oncology, namely Roche and Bristol Myers Squibb.

Acutely aware of Keytruda's impending loss of exclusivity, Merck is leaning on its pipeline to soften the blow, with a focus on cancer therapies and candidates for HIV treatment and prevention.

The drugmaker isn't backing off Keytruda just yet. CEO Robert Davis noted earlier this year that the company has been building a "patent wall" to protect new indications and combination regimens, with some patents extended to 2029. In August, Davis characterized the loss-of-exclusivity period as "more of a hill than a cliff," saying he expected a rapid return to growth following a dip in revenue.