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Peptides derived from the HR1 or HR2 regions of the HIV-1 envelope glycoprotein gp41 have been shown to be effective inhibitors to prevent virus-host cell membrane fusion. These peptide drugs, however, suffer from relatively short plasma half-lives and are susceptible to enzymatic degradation. Modification of peptides/proteins with poly (ethylene glycol) (PEG) is a well established strategy to overcome these limitations: This manuscript presents the results of a systematic study on the influence of the site of PEGylation of HR2-derived peptides, as well as of PEG molecular weight on the biological activity and proteolytic stability of these conjugates. Investigation of the fusion inhibitory efficacy of the conjugates in a model cell-cell based assay revealed a loss in activity for the PEGylated peptides as compared to the wild-type HR2-derived peptide. The loss of activity, however, can be minimized by controlling the site of PEGylation, more specifically, by introducing the PEG chain at one of the more central positions along the non interacting alpha-helical surface of the peptides. The proteolytic stability of the PEG-peptide conjugates was assessed in a trypsin-based model assay, which revealed an up to 3.4-fold increase in degradation half-life that may help to compensate for the lower inhibitory efficacy of the PEG-peptide conjugates as compared to the wild type peptide. The results of this study emphasize the power of site specific PEGylation to improve the stability of peptide/protein drugs while,minimizing adverse effects on biological activity.