We have investigated the suitability of Pichia pastoris as an expression system for the candidate therapeutic protein, Sonic hedgehog fused to an immunoglobulin Fc domain (Shh-Fc). Sonic hedgehog is a morphogen protein involved in the patterning of a wide range of tissues during animal embryogenesis. The presence of Sonic hedgehog and its receptor, Patched, in adult nervous tissue suggests possible applications for the protein in the treatment of neurodegenerative disease and injury. We have engineered the Shh-Fc fusion protein in order to improve binding affinity and increase systemic exposure in animals. N-terminal sequencing, peptide mapping, mass spectrometry, and other biochemical and biological methods were used to characterize the purified protein. These analyses revealed several unanticipated problems, including thiaproline modification of the N-terminal cysteine, cleavage by a Kex2-like protease at a site near the N-terminus, proteolysis at sites near the hinge, addition of a hexose in the CH3 domain of the Fc region, and several sites of methionine oxidation. Sequence modifications to the protein and changes in fermentation conditions resulted in increased potency and greater consistency of the product. The final product was shown to be biologically active in animal studies. (C) 2003 Elsevier Science (USA). All rights reserved.