The miracles have begun to land.

A few months ago (July 2), I explained the dangerous economics behind the artificial intelligence (“AI”) boom: a frontier chip becomes a discount item within 18 months.

Huge capital costs plus rapid depreciation is hard math for a business to overcome. Combine those rapidly depreciating, very expensive chips with zero switching costs (customers move from one AI model to another with a single click), and you’ve got a big problem.

Much like an airline, it doesn’t matter how complex or incredible the technology is: there’s no moat. A business must have a moat that allows it to charge more than its cost of capital and labor. And there’s no moat with data centers or large language models. Thus, there will be no profits.

Instead, I explained how profits from the AI revolution will accrue to businesses that use cheap intelligence to create better products that no competitor can copy – like patented drugs. And I told you about Roivant Sciences (ROIV), a “miracle factory” that’s using AI to find promising drug targets. (Porter & Co. Biotechnology first recommended the stock in March 2024 at $11.37 a share.)

Roivant uses huge amounts of data and AI power to sort through the new drug discard pile – compounds that other firms have abandoned. Roivant’s technology discovers what went wrong with the previous development and figures out how to fix it. The company then licenses these compounds very cheaply, and, to protect itself from risk, it puts each one into its own small company, usually partnering with another firm to provide the development capital.

Since we shared this story with Journal readers in July, Roivant’s miracle factory has produced four outstanding results: one Food And Drug Administration (“FDA”) drug approval, two winning Phase III trials, and one record-setting Phase II trial.

On August 27, the FDA approved brepocitinib, sold as Lisraya, for adults with dermatomyositis. Dermatomyositis is a rare disease in which the immune system attacks the muscles and skin, causing weakness and painful rashes. Lisraya is the first targeted drug ever approved for it. Roivant made it available to patients the same day, about five weeks ahead of its own schedule, at a list price of $35,000 a month, or $420,000 for a year of treatment.