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Chewable Viagra is Coming -- and Pfizer's Family Jewels May Be Going

Pfizer (PFE) will launch "Viagra Jet," a chewable version of the erectile dysfunction drug, in Mexico on March 21. The timing is interesting because it comes near the end of Viagra's patent life. At that point you'd expect Viagra to be transferred to the company's "Established Products" unit, which makes drugs that face cheap generic competition, such as the antidepressant Zoloft.

But that unit would be hived off under CEO Ian Read's new "Innovative Core" plan, in which Pfizer would say goodbye to all its divisions which aren't directly developing new prescription drugs for humans, leaving Pfizer without revenues from Pfizer Jet even if it's successful.

As Eli Lilly (LLY) has shown with Cialis, innovation isn't just about finding brand new drugs. Cialis is a me-too analog of Viagra, but it is about to overtake sales of Viagra because Lilly has been more imaginative with its formulations: One version lasts 36 hours -- le weekender, the French call it -- and another is approved for daily use.

Tweaking drugs can be more popular than discovering them
Formulations can become more popular than the real thing. Bud Light is more popular than Budweiser, for instance, and Apple (AAPL)'s iPod has been all but killed off by the iPod Nano).

Pfizer knows this. It's been experimenting with a non-prescription, over-the-counter version of Viagra for supermarkets in the U.K. and it's looking at a chewable version of cholesterol drug Lipitor for kids. CEO Read's current thinking suggests that he believes "innovation" is defined as discovering new molecular entities. But the Viagra-Cialis-Bud Light stories suggest that consumer-friendly improvements can be just as innovative as new drug discovery.

While Viagra will undoubtedly lose revenues to generic competition it is still one of those drugs where users want some kind of quality guarantee not available from a dodgy generic version from the internet. Used wrongly, Viagra can kill men with blood pressure problems. The Pfizer name can provide that reassurance, suggesting that there are significant incremental revenues to be earned beyond its patent.

Read's plan may unlock value for shareholders, according to Wall Street analysts, but what if it does so only if Pfizer gives away some of its (as yet unpolished) family jewels?

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Image by Flickr user jurvetson, CC.