Battling diabetes and heart disease - the case for A2 milk and A2 Corporation

Monday 26th March 2001

Over the past two decades, cows' milk proteins have been widely suspected as possible risk factors for Type 1 diabetes. Studies in Finland, which has the highest worldwide rate of Type 1 diabetes among children, have indicated that short-term breast-feeding and early consumption of cow's milk are associated with the risk of Type 1 diabetes.

In one study, Finnish researchers studied children from birth and found (by monitoring babies in diabetes-prone families) that infants getting formula which included cows' milk are more likely later to develop the immune reactions associated with Type I diabetes than are babies getting a substitute.

The researchers tracked, until age 8 months, 173 newborns in Finland who had a close relative with Type I diabetes. To augment their mothers' milk, half of these babies received milk-based formula while the rest got a formula in which the cows' milk proteins had been broken into fragments called peptides. The two formulas tasted and smelt the same, so parents and researchers didn't know which one the babies were drinking.

Babies' immune systems largely ignore cows' milk proteins that have been chopped up. However, contact with one intact protein in cows' milk, bovine insulin, may set off a destructive process. The immune system would attack pancreas islet cells that make human insulin, which resembles bovine insulin, and would produce antibodies. At 2 years of age, 10 of the 89 children getting cows' milk formula in the Finnish trial had formed antibodies associated with Type I diabetes. However, only 3 of 84 babies receiving the treated milk showed these antibodies.

Having one type of autoantibody to insulin indicates that a baby has roughly a 4 in 10 chance of contracting Type I diabetes within the next decade. Having more types of these autoantibodies is a sign of greater risk; having three, for instance, means an 80 to 90% likelihood of getting Type I diabetes. In the Finnish study, 3 of the 10 children in the cows' milk group which had diabetes-related autoantibodies showed one type of such antibody while the rest had two or more.

Meanwhile back in New Zealand in the early 1990s, Professor Bob Elliot of the Auckland Medical school had also commenced research into a link between milk and Type 1 diabetes. Elliott had noticed that non milk-consuming countries lacked Type 1 diabetes and related diseases such as high levels of coronary heart disease. He noticed that Iceland, which has the highest consumption of milk in the world, had low rates of diabetes and coronary heart disease. It turned out that the milk they consumed is from a different sort of cow, a very ancient Norske breed.

Elliott's research, more importantly, identified a protein in milk that he believes to trigger insulin-dependent diabetes in those prone to the condition. He found that the diabetes and coronary heart disease risk rate appear to be associated with the consumption, not of milk so much, but of a component of it which is found in cows associated with beta casein A1 but not with beta casein A2 (A1 and A2 refer to different forms of the protein, beta casein, which are found in the milk of distinct genetic types of cows). Animal-based studies at the Auckland Medical School corroborated Elliott's hypothesis that A1 milk was a cause of Type 1 diabetes.

When Elliott's research indicated a link between the A1 protein and Type 1 diabetes, the Child Health Foundation approached the New Zealand Dairy Board (NZDB) and suggested that the Board should take an interest in the research. The NZDB then agreed to fund further research through the New Zealand Dairy Research Institute (a research arm of the NZDB). In November 1994, the NZDB (with the Child Health Research Foundation) filed a patent application arising from the link between the A1 protein and Type 1 diabetes.

In 1999, an article, authored by (amongst others) NZDRI scientists on the Type 1 diabetes and A1 protein correlation was published. The NZDRI scientists announced they had identified a peptide produced on digestion of A1 (but not A2) called beta casomorphin 7 and had filed a second patent application which stated:

"It is known that the A1 variant of beta casein induces Type 1 diabetes immune response. However, it is believed on the basis of what is known in general about immune responses that the A1 variant may induce other immune responses of importance to the health of individuals. The present invention is not limited to determining the susceptibility of individuals to Type 1 diabetes but includes diagnosis of any other immune condition which may be caused by the presence of the active peptide."

In plain language, the patent takes as its starting point that the A1 protein causes Type 1 diabetes and the adverse effects of A1 may be more wide ranging. It also states that the problem with A1 arises from the peptide called beta casomorphin 7. The patent claimed rights to a diagnostic test for people which will show who is susceptible.

Later research done by Auckland scientist Dr Corran McLachlan also showed a strong relationship between the same protein and heart disease. McLachlan collated data from 16 countries that showed the more milk consumed by people, the higher the heart disease rate. He is researching the theory that a peptide or amino acid in the A1 protein might be the risk factor in heart disease which kills more than 8000 New Zealanders a year. A2 does not have the peptide and McLachlan is working with other experts in New Zealand and overseas to prove that the protein peptide permeates through the gut of some people on a random basis, into the blood stream and damages arterial walls.

It must be stated though that the A1 protein is not thought to be problematic in butter (because it is mainly fat and contains very little protein) nor cheese (probably because of the rendering process which prevents the formation of the beta casamorphin 7 peptide on digestion).

Last December, Dunedin-based A2 Corporation paid $8.55 million for a half-share in a patent held jointly with the New Zealand Dairy Board covering the milk protein research and its link to Type 1 diabetes. A2 Corp holds 100% of the McLachlan patent covering the heart link work. The company intends moving from the secondary board of the NZSE to the main board (possibly in May/June) and plans to have its first production of A2 milk available in New Zealand and Australia by the second quarter of this year.

Cows with one A1 gene and one A2 gene produce a mixture of both A1 and A2 milk. Cows with two A1 genes produce pure A1 milk while cows with two A2 genes produce pure A2 milk. At present, approximately 20% of the New Zealand dairy herd produce pure A2 milk. The percentage of the herd which is pure A2 is sufficient to supply the New Zealand fresh milk market with pure A2 milk seven times over (only approximately 3% of New Zealand's milk production is consumed as fresh milk). However by crossing the herd with A2/A2 bull semen, the percentage of pure A2 cows can be quickly increased. A2 Corp, in conjunction with AgResearch, has completed development of a DNA test to identify and select pure A2 cows. Bulk-testing of herds here and in Australia has recently begun and the company has set up offices in the United States, Australia, Britain and Europe as it gears up for a global production of A2 milk.

In January, A2 Corp signed its first contract to process A2 milk with a big Australian company and it has also registered brand names for the milk in different countries. In Australia, dairy herds owned by Tasman Agriculture are currently being tested. In New Zealand, Maniototo's Big Sky Dairy has started planning to produce high-quality A2 milk and was awaiting the results of DNA tests for the level of A2 milk in its cows. The company said it expected up to 20% of its herd to be "positive" and was looking to be one of the first suppliers of the milk when the market required it.

A2 Corp is also understood to have signed up the backing of international
investors and dairy companies in New Zealand and overseas, and is negotiating several production deals that have the potential to earn billions of dollars from royalties on its milk patents.

So what can investors make of all of this? While hypotheses involving the potential detriment of A1 milk have yet to be proven, there is a growing acceptance in science and dairy quarters that there could be a very real and serious risk that A1 is a cause of Type 1 diabetes in some people who have a genetic predisposition to it. All agree, however, that more scientific research will have to be carried out. For its part, A2 Corp has confirmed it is funding extensive further studies, including through the Otago Medical School and three university centres in Australia.

Marketing and pricing will obviously play an important part in the success or otherwise of the A2 product but if A2 Corp get it right, the mega-dollar "blue sky" is potentially there. Ultimately, the one factor that may sway the minds of consumers will be the safety (or more importantly, the "perceived" safety) angle. And if there is a "perceived" safer product on the market being offered at a non-prohibitive cost, and until proven otherwise, consumers may well flock to A2.

Multi-millionaire Howard Paterson, and a major A2 Corp shareholder, is understandably extremely bullish about the future of A2. "Like Professor Elliott, I believe a major worldwide change to A2 milk will happen," he said. Apart from a substantial personal stakeholding in A2 Corp, Paterson's Southern Capital Limited (SCL) is also a major shareholder in the company.

Meanwhile, A2 Corp executive David Parker has indicated that the company is sufficiently funded and does not intend to issue new shares when it lists on the main board of the NZSE in May. An over-subscription of a $12 million placement of new shares last month to big New Zealand institutions and North American and European investors had attracted strong private investor support.

A2 Corp currently trades on the secondary board but despite a 1-for-5 share split last month, there is still little liquidity. However, investors can reasonably expect to hear more about A2 milk and A2 Corp in the weeks to come before the company lists on the main board - lots of time for all to ponder whether there could be lucrative cream in all that milky froth!

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