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We previously demonstrated that dexramethasone (Dex) induces the transdifferentiation (or conversion) of the pancreatic progenitor cell lineAR42J-B13 (B13) to hepatocytes based on the expression of liver proteins. We have extended our original observations to determine: (I) the effects of Dex on pancreatic gene expression; (2) the time course of expression of liver enriched transcription factors during conversion from pancreatic to hepatic phenotype; (3) the functional potential of transdifferentiated hepatocytes; (4) the proliferative capacity of transdifferentiated hepatocytes; and (5) whether ectopic expression of transcription factors can induce the hepatic phenotype in pancreatic B13 cells. The results were as follows. The B13 cell markers amylase, synaptophysin, and neurofilament were lost in transdifferentiated hepatocytes compared to control cells and the liver-enriched transcription factors C/EBP beta and C/EBP alpha were induced first, followed by HNF4 alpha and then RXR alpha. Using RT-PCR analysis and immunolocalisation studies, we detected hepatic markers (e.g., apolipoprotein 13) in Dex-treated cells. In transdifferentiated hepatocytes albumin was secreted, insulin stimulated lipid deposition and ciprofibrate enhanced the expression of catalase. Proliferation of transdifferentiated hepatocytes is promoted in the presence of HGF and NEAA as indicated by the co-expression of the cell cycle markers cyclin D and phosphohistone H3 with liver proteins. Lastly, ectopic expression of C/EBPa or C/EBP beta in AR42J-B13 cells was sufficient to induce transdifferentiation, based on nuclear localization of HNF4 alpha and induction of UDP-glucuronosyltransferase expression. These results indicate that the B13 progenitor cell model is suitable for studying liver function and for understanding the molecular and cellular events that occur during transdifferentiation.