A2 milk firm sees cream in US

By LIAM DANN, primary industries editor

The last six months have been traumatic and slightly surreal for high-tech milk company A2 Corporation.

The sudden deaths of chief executive Dr Corran McLachlan and chairman Howard Paterson could easily have signalled the end for the company.

But under the guidance of two dedicated staff members, A2 is forging new links that should launch it on a global stage.

A partnership with US billionaire David van Andel - son of Amway founder Jay van Andel - has ensured survival.

Now a budding relationship with the inventor of sports drink Gatorade is raising possibilities that A2 milk could be used in medical research.

The milk, which contains only the A2 variety of beta casein, is promoted as healthier than standard milk, which has both A1 and A2 varieties.

Some studies have shown that A2 milk, launched onto the market in April, has beneficial effects relating to diabetes and heart disease.

Paterson and McLachlan, as company co-founders, provided inspiration for the rest of the staff.

New chief executive Andrew Clarke says that passion has not disappeared. If anything, he and John Ryall, the company's only other senior executive, are more determined than ever to take A2 to the world.

The weeks following the deaths were a "rough ride", Clarke says.

"I wouldn't say we thought it could be all over, but we certainly did realise things had changed as far as support for the company was concerned."

While Clarke always maintained faith in the directors and shareholders, he accepts there was some anxiety about where the money would come from.

"It's all very well having an idea, but until you start getting an income, shareholders are naturally cautious," he says.

Thankfully, any uncertainty was shortlived.

Ryall, the international sales manager, returned from the United States last month with the deal that will ensure A2's survival.

Clarke describes new partner IdeaSphere as a heavyweight company run by independently wealthy businesspeople with a passion for environmentally friendly products.

In addition to chairman and chief executive van Andel, vice-chairman Bill Nicholson is a former chief operating officer for Amway.

"We think it represents about 40 per cent of the world market for A2," Ryall says of the US deal.

He expects it will take up to a year to get the milk on to shelves in the US, but by the end of year two IdeaSphere is expected to deliver a minimum of $5 million to A2 for use of its intellectual property.

That figure sets a legal bottom line in the contract, but the expectation is that returns will be much higher, he says.

McLachlan made initial contact with IdeaSphere last year. Ryall and Clarke revived the talks this year.

"It took time for their interest to build to a point where they made a definite decision to aggressively go after marketing rights," Ryall says.

"It was a long, hard negotiation because both sides realised the value of the whole North American market.

"We feel that we came out of that with a very positive deal."

Ryall is lining up a deal with an Australian company and other agreements are in the pipeline.

Europe will be the next target.

A2 Corporation is fundamentally an intellectual property (IP) licensing company, Clarke says. It has no plans to do its own marketing internationally.

He is well aware that intellectual property is a depreciating asset. Companies such as A2 have to keep progressing. He is excited about the possibility that A2 milk could make the jump from health food to medical treatment.

Before McLachlan died he began to investigate anecdotal evidence that A2 was having positive effects for autistic children.

Following that up, Ryall has initiated talks with Florida University professor James Cade, who invented Gatorade, the first electrolyte replacement sports drink.

His most recent work is on disorders such as autism and schizophrenia. He has published work on a possible link between autism and the inability to break down specific milk proteins.

Cade is well-funded and has expressed an interest in working with A2, Ryall says.

Clarke, who joined A2 as a scientist, wants to carry on McLachlan's work. "As a biotech company we have a responsibility to keep pursuing this thing," he says.

"Anecdotally we've had a lot of unsolicited feedback about perceived improvements in the quality of life from a number of families. We're talking about mothers with kids who couldn't drink milk; who used to play up during the day ...

"We can't make any claims but it presents a very, very attractive hypothesis."