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The cytotoxic self-aggregation of β-amyloid (Aβ) peptide and islet amyloid polypeptide (IAPP) is implicated in the pathogenesis of Alzheimer’s disease (AD) and Type 2 diabetes (T2D), respectively. Increasing evidence, particularly the co-deposition of Aβ and IAPP in both brain and pancreatic tissues, suggests that Aβ and IAPP cross-interaction may be responsible for a pathological link between AD and T2D. Here, we examined the nature of IAPP-Aβ40 co-aggregation and its inhibition by small molecules. In specific, we characterized the kinetic profiles, morphologies, secondary structures and toxicities of IAPP-Aβ40 hetero-assemblies and compared them to those formed by their homo-assemblies. We demonstrated that monomeric IAPP and Aβ40 form stable hetero-dimers and hetero-assemblies that further aggregate into β-sheet-rich hetero-aggregates that are toxic (cell viability <50%) to both PC-12 cells, a neuronal cell model, and RIN-m5F cells, a pancreatic cell model for β-cells. We then selected polyphenolic candidates to inhibit IAPP or Aβ40 self-aggregation and examined the inhibitory effect of the most potent candidate on IAPP-Aβ40 co-aggregation. We demonstrated that epigallocatechin gallate (EGCG) form inter-molecular hydrogen bonds with each of IAPP and Aβ40. We also showed that EGCG reduced hetero-aggregate formation and resulted in lower β-sheets content and higher unordered structures in IAPP-Aβ40-EGCG samples. Importantly, we showed that EGCG is highly effective in reducing the toxicity of IAPP-Aβ40 hetero-aggregates on both cell models, specifically at concentrations that are equivalent to or are 2.5-fold higher than the mixed peptide concentrations. To the best of our knowledge, this is the first study to report the inhibition of IAPP-Aβ40 co-aggregation by small molecules. We conclude that EGCG is a promising candidate to prevent co-aggregation and cytotoxicity of IAPP-Aβ40, which in turn, contribute to the pathological link between AD and T2D.