ViaLactia dairy project pays off

By SIMON COLLINS

Dairy farmers have begun to see the first returns from $150 million committed to Fonterra's biotechnology subsidiary, ViaLactia.

A joint venture between ViaLactia and the farmer-owned Livestock Improvement Corporation (LIC) has found a breakthrough gene which increases milkfat and protein in milk.

LIC has agreed to pay a six-figure annual licensing fee to the joint venture, boviQuest, to test its prime bulls for the gene, which it has named "Optimum".

The discovery coincides with ViaLactia's appointment of a new chief executive, Dr Colin South, a 39-year-old New Zealander, who was a vice-president of Boston-based biotech engineering company BioMetics.

Founding chief executive Dr Kevin Marshall, a 40-year dairy industry veteran, has retired.

LIC genetics general manager Peter Gatley said the Optimum gene test was already saving LIC money by eliminating young bulls which failed the test from the costly process of progeny testing.

"Progeny testing requires generating 80 daughters each and waiting for them to enter a milking herd. It takes years and costs $30,000 per bull," he said.

"We do 300 a year. That's $9 million a year to find which are the best bulls."

LIC estimates that its breeding programme adds $32 million a year to the value of the country's dairy herd, and the new gene will boost this.

"Progeny testing will still take as many years as it does now, but because you can apply more selection you will have a greater rate of genetic gain," Gatley said.

As more genes affecting milk qualities are discovered, he expects that genetic testing will ultimately do away with the need for progeny testing.

The joint venture said in March that it had found another gene, DGAT1 or "Quantum", which has two variants - one producing higher milkfat in milk, and one making higher protein.

But Gatley said this gene turned out to be less valuable for New Zealand than Optimum, because it could only produce more protein at the cost of less fat and higher milk volume. The net effect for farmers' incomes would be zero.

"The Quantum gene may have more value offshore where they pay for fluid milk by the litre," he said. BoviQuest is looking to license the Quantum gene test in the United States and elsewhere.

Meanwhile, South said ViaLactia had spent "substantially less than half" of the $150 million which Fonterra budgeted for its first five years from 1999 to 2004 in New Zealand's biggest private-sector biotech investment.

The Ellerslie-based company's 40 staff are working on three priority areas:

* Further work with LIC to identify other valuable cattle genes, using a trial in Taranaki of up to 850 jersey and friesian cows chosen to provide the widest possible genetic diversity.

* Using genetic testing to develop better varieties of rye grass and white clover.

* Research on the genes of microbes in cows' bodies that turn grass into milk.

Born in South Canterbury, South studied chemical and process engineering at Canterbury University and began his career at the Kapuni lactose plant, which is now part of Fonterra.

South left New Zealand for the United States in 1989.

He completed a doctorate in bioprocess engineering at Dartmouth College in New Hampshire and has worked for the past eight years at BioMetics, a Boston company which designs manufacturing plants for biopharmaceutical and environmental technology companies.

Vialactia