Proteolytic processing of palmitoylated Hedgehog peptides specifies the 3-4 intervein region of the Drosophila wing

Cell fate determination during development often requires morphogen transport from producing to distant responding cells. Hedgehog (Hh) morphogens present a challenge to this concept, as all Hhs are synthesized as terminally lipidated molecules that form insoluble clusters at the surface of producing cells. While several proposed Hh transport modes tie directly into these unusual properties, the crucial step of Hh relay from producing cells to receptors on remote responding cells remains unresolved. Using wing development in Drosophila melanogaster as a model, we show that Hh relay and direct patterning of the 3–4 intervein region strictly depend on proteolytic removal of lipidated N-terminal membrane anchors. Site-directed modification of the N-terminal Hh processing site selectively eliminated the entire 3–4 intervein region, and additional targeted removal of N-palmitate restored its formation. Hence, palmitoylated membrane anchors restrict morphogen spread until site-specific processing switches membrane-bound Hh into bioactive forms with specific patterning functions.


Introduction
Hedgehog (Hh) morphogens are dually lipidated 19 kDa proteins that are firmly anchored to the cell membrane of producing cells. Production of all active Hhs begins with autocatalytic cleavage of a precursor molecule by its C-terminal cholesterol transferase domain (Porter et al., 1996b). This results in cholesteroylated vertebrate Sonic hedgehog (Shh) and Drosophila Hh. Next, Hh acyltransferase (Hhat, also designated Skinny hedgehog or Raspberry) attaches a palmitoyl group to a conserved N-terminal cysteine that becomes exposed after signal peptide cleavage (Chamoun et al., 2001;Micchelli et al., 2002). Hh palmitoylation is critical for later signaling, demonstrated by mutation of the N-terminal cysteine to serine or alanine (C25 > A/S in Shh C25A/ S , C85 >A/S in Drosophila Hh C85A/S ) which abolishes palmitoylation and results in morphogen inactivity (Chamoun et al., 2001;Chen et al., 2004;Dawber et al., 2005;Goetz et al., 2006;Kohtz et al., 2001;Pepinsky et al., 1998). However, why N-palmitoylation is required for Hh signaling in vivo is still unclear.
Another unusual feature of all Hhs is their multimerization at the surface of producing cells which requires binding to the long, unbranched heparan sulfate (HS) chains of cell surface HS proteoglycans (HSPGs) called glypicans (Chang et al., 2011;Ortmann et al., 2015;Vyas et al., 2008). The Hh cholesterol modification is sufficient to drive this process (Feng et al., 2004;Gallet et al., 2006;Koleva et al., 2015;Ohlig et al., 2011). Despite membrane anchorage and cellsurface HS association, the multimeric Hhs initiate the Hh response in distant cells that express the Hh receptor Patched (Ptc). The question of how dual-lipidated Hh clusters manage to travel and signal to remote target cells is intensely investigated. The most current models propose lipidated Hh transport on filopodia called cytonemes (Bischoff et al., 2013;Sanders et al., 2013) or on secreted vesicles called exosomes (Gradilla et al., 2014) to bridge the distance between Hh-producing and receiving cells.
Hh release through cell-surface-associated proteases, called sheddases, has also been suggested. In vitro, membrane-proximal shedding not only releases Hh ectodomains from their lipidated N-terminal peptides (Dierker et al., 2009;Ohlig et al., 2011) but also activates Hh clusters. This is because N-terminal lipidated peptides block adjacent Hh-binding sites for the receptor Ptc and, thereby, render Hh at the cell membrane inactive. By cleaving these inhibitory peptides during release, sheddases unmask Ptc binding sites of solubilized clusters and thereby couple Hh solubilization with its bioactivation. In this model, the N-palmitate plays two indirect roles for Hh biofunction: first, it ensures reliable membrane-proximal positioning of inhibitory N-terminal peptides as a prerequisite for their efficient proteolytic processing, and second, by its continued association with the cell membrane, it ensures that only fully processed (=activated) Hh clusters are released. This model therefore predicts that inhibition of N-palmitoylation will result in release of inactive soluble proteins with masked Ptc-binding sites (Jakobs et al., 2014;Jakobs et al., 2016;Ohlig et al., 2011; eLife digest Each cell in a developing embryo receives information that determines what type of body structure it will form. In fruit flies, this information is partly given by a protein called Hedgehog. In the embryo cells that receive it, Hedgehog can trigger a series of events which activate certain genes and thereby regulate structure formation.
The Hedgehog proteins are produced by a different organizing group of cells: from there they transport within the embryo, creating a gradient. Depending on where a responding cell is in the embryo, it receives a different amount of Hedgehog, which gives the cell its identity. For example, Hedgehog proteins form a gradient across a fruit fly's developing wing, which creates a visible vein pattern. How Hedgehog proteins form gradients is enigmatic, however, because once produced, they cling to the cells that created them.
The reason for this unusual behavior is that the two ends of the Hedgehog protein are attached to a different fat molecule. In particular, one extremity is linked to a fat molecule called palmitate. These ends' fatty additions anchor Hedgehog to the cells that produced them. Then, the tethered proteins gather together to form chain-like clusters where they inactivate each other: the extremity with the palmitate 'hides' the portion of the neighboring protein that binds to the receiving cells. It is still unclear how Hedgehog can be activated and released to reach these faraway cells.
One hypothesis is that an enzyme comes to the clusters and frees the proteins by cutting both of Hedgehog's fatty anchors. Thanks to how the palmitate tethers Hedgehog to the cell, the protein is positioned in such a way that when the enzyme makes its snip, the binding site on the neighboring Hedgehog gets exposed: this protein is activated and, when also cut by the enzyme, released.
Here, Schü rmann et al. create an array of mutant Hedgehog proteins -for example some without palmitate, some with palmitate that cannot be removed by the enzyme -and study how they affect the development of the wing's pattern in the fruit fly. Coupled with the imaging of the clusters, these experiments support the hypothesis that the palmitate anchor is necessary so that Hedgehog proteins can be turned on before diffusing away.
The Hedgehog family of proteins is also present in humans, where it presides over the development of the embryo but is also involved in cancer. Understanding how Hedgehog works in the fruit fly could lead to new discoveries in humans too. Ohlig et al., 2012). It also predicts that impaired or delayed processing of dual-lipidated Hh will strongly reduce its release and bioactivity in vivo.
By uncovering a dominant negative, cell-autonomous function of non-palmitoylated Hh C85S in endogenous Hh, we here support the first prediction. By using a series of transgenic Drosophila melanogaster lines that express untagged Hh, biologically inactive Hh C85S , or N-truncated variants thereof in posterior and anterior wing disc compartments, we provide strong evidence that Hh clusters form by direct protein-protein contact and that unprocessed N-terminal peptides block Ptc binding of adjacent endogenous Hhs. As a consequence, we suggest that, due to their reduced activity, soluble clusters with masked Ptc-binding sites impair direct patterning of the 3-4 intervein region of the wing. Supporting this mechanism, targeted deletion on non-palmitoylated inhibitory peptides restores 3-4 intervein formation. We also show that impaired or delayed processing of lipidated Hh strongly reduces its solubilization, and hence its bioactivity, in vivo. We demonstrate that the HS-binding Cardin-Weintraub (CW) motif serves as the preferred N-terminal Hh processing site in vivo, and that impaired processing of this site completely abolishes direct 3-4 intervein wing patterning. Additional targeted deletion of N-palmitate restores wing patterning, demonstrating that one role of palmitoylated membrane anchors is to prevent the release of un-or incompletely processed Hh clusters in vivo. These genetic data are supported by the nano-structure of Hh clusters as revealed by immunoelectron microscopy (IEM) and provide new insights into how Hh relay from the producing cell membrane or between membranes could be achieved.

Results
Visualization of Hh multimer nano-architecture by IEM A first step in decoding possible Hh solubilization modes is to characterize the composition and organization of Hh substrates. It has been previously shown that Hh forms light microscopically visible clusters at the surface of producing cells (Chen et al., 2004;Gallet et al., 2006;Ortmann et al., 2015;Sanders et al., 2013;Vyas et al., 2008). However, the nanoscale structure of these heteroprotein complexes has not been determined. We therefore expressed Shh together with Hh acyltransferase in HEK293-derived Bosc23 cells to produce authentic cell surface Hh clusters for IEM analysis. To this end, we used several different a-Shh antibodies and secondary antibodies conjugated to 5 nm or 10 nm gold particles. Three a-Shh antibodies detected Shh in variably sized cell surface clusters, with the largest complexes exceeding sizes of 100 nm. Notably, as shown in Nearest-neighbour analysis of the angular distribution between the three most proximal gold particles ( Figure 1i) confirmed that most arrangements were rectangular (90˚) or linear (180˚), the latter being consistent with Hh multimerization using linear HS chains of glypican HSPGs as templates (Chang et al., 2011;Vyas et al., 2008;Schuermann et al., 2018). Hh linearization during cell-surface multimerization is further consistent with previous structural and biochemical data which suggest a zig-zag arrangement of Hh monomers ( Figure 1j) and variably sized Drosophila Hh and vertebrate Shh, ranging from 80 kDa to 600 kDa (Chang et al., 2011;Chen et al., 2004;Jakobs et al., 2014;Ohlig et al., 2011;Ohlig et al., 2012). We therefore next aimed to genetically confirm direct Hh clustering in vivo by using Drosophila melanogaster wing development as a model.

Multimeric Hh C85S inhibits wild-type Hh function
The fly wing develops from the imaginal wing disc (Figure 2a, bottom). The wing primordium at the center of the wing disc differentiates into the wing blade proper, which shows a characteristic pattern of five longitudinal veins (L1-5), an anterior cross vein (connecting L3 and L4) and a posterior cross vein (connecting L4 and L5) (Figure 2a, top) (Hartl and Scott, 2014). The anterior/posterior (a/ p) boundary is located slightly anterior to the position of L4 in the adult wing ( Figure 2a, red dashed line).
Hh is produced in the posterior wing disc compartment under the control of the transcription factor Engrailed (en) (Tabata et al., 1992;Zecca et al., 1995), which acts indirectly on Hh expression through the repression of the transcriptional Hh repressor Cubitus interruptus (Ci) (Bejarano and Milán, 2009). Hh then moves across the a/p boundary into the anterior compartment, where it binds to Ptc (Ingham et al., 1991). During its movement, Hh forms a gradient of decreasing concentration with increasing distance from the a/p border which corresponds to differential activation of different Hh target genes. Up to ten cell diameters from the a/p boundary, high Hh levels directly pattern the central L3-L4 region of the wing (Mullor et al., 1997;Strigini and Cohen, 1997) by stabilizing Ci 155 . More distal regions, up to 12-15 cell diameters from the a/p border, depend on Dpp, which is secreted in a stripe just anterior to the a/p boundary in response to low Hh levels. Hh thus plays a role in Drosophila wing patterning by controlling the spatially defined expression of target genes at the a/p border. Immuno-TEM analysis of Shh clusters at the Bosc23 cell surface (a-g). a-Shh immunogold labeling suggests that Shh forms linear arrangements (EC: extracellular; IC: intracellular). Shh and Hh acyltransferase were coexpressed in Bosc23 cells and cell-surface-associated clusters visualized by two independent a-Shh antibodies and 5 nm and 10 nm immunogold-labeled secondary antibodies. Note Shh clusters on cellular extensions (dashed line in e) and continuous immunogold labeling in cell-surface aggregates (f,g, white arrowheads) consistent with linear Shh clustering. (h) 3D heat map conversion of the cell-surface cluster shown in g. Bright yellow indicates 5 nm and 10 nm gold, and dark colors represent the background. (i) Quantification of angular distributions of the three most adjacent gold particles within clusters confirm non-random Shh clustering. 187 angles in 20 individual cell-surface clusters were analyzed. (j) Hh pentamer model. Hh monomers form extended zigzag chains (Ohlig et al., 2011). DOI: https://doi.org/10.7554/eLife.33033.003 The following figure supplement is available for figure 1: We exploited the Hh-regulated wing patterning response as a simple and reliable in vivo assay to test the functional consequences of proteolytic Hh processing. Specifically, we addressed the formation and positioning of longitudinal L3-L4 veins, and investigated whether Hh proteolytic processing in cells of the posterior compartment is a prerequisite for its signaling activity in cells of the anterior compartment (Crozatier et al., 2004). To this end, comparable amounts of Hh and Hh variants ( Figure 2b, Supplementary file 1) were expressed from one specific attP 51C landing site on the second chromosome (Bateman et al., 2006) using the Gal4/UAS system (Brand and Perrimon, 1993). In the posterior compartment, Hh was expressed under en-Gal4 control, which is referred to as en >Hh, while in the anterior compartment, Hh was expressed in a stripe of cells under ptc-Gal4 control, referred to as ptc >Hh. As previously shown (Crozatier et al., 2004;Mullor et al., 1997;Strigini and Cohen, 1997), en >Hh expanded the L3-L4 intervein area and, as a concomitant effect, reduced the L2-L3 intervein space (Figure 2c). By contrast, en-regulated overexpression of non-palmitoylated, biologically inactive Hh C85S (en >Hh C85S ) resulted in L3-L4 veins being proximally apposed and the formation of ectopic anterior cross veins ( Figure 2d) (Crozatier et al., 2004;, suggesting that Hh C85S competes with bioactive wild-type Hh . This phenotype is consistent with the higher Hh concentrations required for activation of the target genes, ptc and collier, and L3-L4 development, than those required for the activation of dpp, which patterns the remainder of the wing (Hooper, 2003;Méthot and Basler, 1999;Mohler et al., 2000;Strigini and Cohen, 1997;Vervoort et al., 1999). Wing phenotypes were quantified by dividing the proximal L3-L4 areas by the L2-L3 areas (Figure 2e,f). This revealed significant Hh gain of function upon Hh overexpression in the posterior compartment or loss of function upon Hh C85S overexpression (en >GFP served as a normal control: L3-L4/L2-L3 = 0.074 ± 0.002; en >Hh = 0.108 ± 0.005 (+46%), p<0.0001; en >HhC C85S =0.032 ± 0.002 (-57%), p<0.0001).

Hh C85S cell-autonomously suppresses endogenous Hh function
To investigate the molecular basis of the dominant-negative Hh C85S activity in wing disc tissues, we spatially disconnected Hh C85S expression from endogenous Hh expression by using ptc >Hh C85S . In the event that biologically inactive Hh C85S would impair the response to Hh in a non-cell autonomous manner, for example, by binding to and blocking the receptor Ptc, ptc >Hh C85S wing phenotypes should be comparable, or even more severe than those observed in en >Hh C85S wings. Alternatively, if unprocessed N-terminal Hh C85S peptides directly inhibit Ptc binding of associated endogenous Hh produced in the same compartment, we expected ptc >Hh C85S wing phenotypes to be less severe than those observed in en >Hh C85S wings. Indeed, Hh C85S expression under ptc control had little effect on wing development ( Figure 2g,h: ptc >GFP: 0.084 ± 0.001, ptc >Hh C85S : 0.078 ± 0.002 (-7%), p=0.0026), suggesting that Hh C85S cell-autonomously interferes with endogenous Hh, possibly by the random mixing of inactive Hh C85S and wild-type Hh at the cell surface (Figure 2i, left). In this mixed association, unprocessed Hh C85S N-terminal peptides block wild-type Hh-receptor-binding sites in trans. By contrast, ptc>Hh C85S expression in the anterior compartment prevents mixed cluster formation and therefore does not affect the controlled secretion and signaling of endogenous Hh (Figure 2i, right).

N-terminal Hh C85S truncation reverses its dominant negative activity over Hh
We next determined the molecular basis of the cell-autonomous inhibitory activities of Hh C85S . In vitro, N-terminal peptides block Ptc-receptor-binding sites of adjacent Hh molecules in the cluster in trans ( . All ten constructs were then inserted into the attP-51C landing site on the second chromosome to ensure comparable expression. At least three independent transgenic fly lines were derived from each construct and crossed with the en-Gal4 driver line. We observed unchanged or moderately changed L3-L4/L2-L3 intervein ratios between en >Hh C85S and en >Hh C85S;D86-91 to en >Hh C85S;D86-97 adult wings ( . Cell-autonomous inhibitory activities of Hh C85S and restored wing patterning upon targeted coexpression of en >Hh C85S;D86-100 were confirmed with the independent en-driver lines en(2)-Gal4 and hh-Gal4, both controlling transgene expression in the wing disc (Figure 4-figure supplements 4 and 5). These results are consistent with the assembly of Hh clusters by direct protein-protein contacts as a prerequisite for the inhibitory activity of unprocessed N-terminal peptides.
We also observed that wing phenotypes varied between and within fly lines (labeled 1-4 in Figure 4-figure supplement 3b). This variability can be explained by slightly different expression levels or by small stochastic changes in Hh/Hh C85S cluster composition with increasing relative amounts of Hh C85S , resulting in stronger dominant negative phenotypes. Indeed, temperature-dependent Gal4-regulated transgene amounts (Duffy, 2002) affected dominant-negative wing phenotypes: At 29˚C, increased amounts of Hh C85S relative to (fixed) endogenous Hh inhibited Hh function more   Taken together, we conclude that N-palmitate serves to ensure reliable membrane-association of inhibitory N-termini, making quantitative peptide processing a prerequisite for the solubilization of fully activated clusters ( Figure 5a). As a consequence, Hh concentrations at any position in the gradient will strictly correlate with their biological activities (i.e. their Ptc-binding capacities). Impaired N-palmitoylation in this scenario reduces Hh bioactivity to variable degrees, depending on the relative number of unprocessed N-terminal peptides in soluble clusters ( Figure 5b). This essential 'cleavage/activation control' function is confirmed by fully restored Hh biofunction upon targeted coexpression of en >Hh C85S;D86-100 (Figure 5c). Figure 5. Simplified model for the conversion of membrane-bound Hh into soluble clusters. Surface-tethered wild-type Hh monomers (colored green and blue for clarity) form multimeric clusters with their extended N-and C-terminal lipidated peptides tethered to the cell membrane. (a) Membrane-proximal proteolytic processing (scissors) removes lipidated membrane anchors and releases Hh clusters from posterior cells. As a consequence, protein concentrations at any position in the responsive (anterior) field correlate with their biological activities (their Ptc-receptor-binding capacities). Because partially processed clusters are not released, the role of both lipids at this point is to control quantitative Hh processing and bioactivation. (b) Unpalmitoylated Hh C85S only requires processing of its cholesterylated C-terminus for release: As a consequence, a fraction of wild-type Hh in mixed clusters has its Ptc-receptor-binding sites and bioactivity blocked (indicated by the X) by unprocessed adjacent Hh C85S N-termini (asterisk). Signaling at any position in the field is thus reduced, leading to dominant negative wing phenotypes (right). LOF: loss of function. (c) Artificial truncation of unpalmitoylated Hh C85S N-termini restores wild-type Hh function. wt: wild type. DOI: https://doi.org/10.7554/eLife.33033.014 N-palmitate controls Hh release from the cell surface in vitro In our model, N-palmitate tethers incompletely processed Hh clusters to the cell membrane to prevent their release. To test this hypothesis, we utilized a cell culture model employing Bosc23 cells. To achieve quantitative Hh N-palmitoylation in vitro, we used bicistronic mRNA constructs to couple Shh (the vertebrate Hh ortholog) and Hh acyltransferase expression in the same cells. We then compared the release of fully lipidated Shh, non-palmitoylated Shh C25S , and variants carrying the extended C-terminal membrane anchor N 190 SVAAKSG-  represents the cholesterol-modified glycine; italicized underlined letters represent the tag, Figure 6) (Jakobs et al., 2014). Proteins were detected by polyclonal a-Shh antibodies and monoclonal a-HA antibodies on the same (stripped) blots. Grayscale blots were inverted, colored (green: a-Shh signal, blue: a-HA signal) and merged to identify proteins bound by both antibodies (yielding bright blue/cyan signals) and proteins bound by only a-Shh antibodies (green signals).
To test whether the same modification would also impair release of fly Hh, we inserted an HA tag between corresponding Hh amino acids L91 and G92, resulting in the N-terminal HA Hh sequence C 85 GPGRGL 91 -YPYDVPDYAG 92 -RHRARN (bold letters represent the CW motif that is shifted nine amino acids away from the preferred membrane proximal site of sheddase activity). We also used Hh, non-palmitoylated Hh C85S and Hh C85S;D86-100 as controls. HA Hh was expressed in S2 cells, its unimpaired multimerization confirmed ( Figure 6-figure supplement 1), and cellular and soluble proteins compared by SDS-PAGE and immunoblotting (Figure 6e). We observed that all proteins were produced in S2 cells, as indicated by strong a-Hh antibody binding to all cellular forms. In contrast, only low levels of HA Hh that retained the tag were solubilized, suggesting that N-terminal processing was impaired in S2 cells. From these experiments, we conclude that N-palmitoylation controls Hh release from the cell surface and restricts possible modes of Hh solubilization to shedding (Figure 6f,g).

Unimpaired proteolytic processing of N-palmitoylated Hh termini is essential for direct but not indirect in vivo Hh signaling
We next generated transgenic flies expressing HA Hh (Figure 7a) in the posterior compartment. The HA-tagged protein, due to its invariable association with the membrane (Figure 6e) and direct association with endogenous Hh in mixed clusters, was expected to impair endogenous Hh release and to lead to severe dominant-negative mis-patterning phenotypes. Indeed, HA Hh expression in the posterior compartment at 25˚C largely arrested fly development at the pupal and pharate stages, leading to defective head development characteristic of Hh loss of function (Torroja et al., 2004). Of 230 pharates counted, only three imagos hatched with smaller wings lacking anterior structures (Figure 7b), again characteristic of Hh loss of function (Bejarano et al., 2012). Reduced transgene expression at 18˚C largely reversed pharate lethality: 77% of en> HA Hh pharates hatched (293 flies from 393 pupae) but wing development was still impaired with all analyzed wings lacking all or most of the L3-L4 intervein area (Figure 7c). This phenotype resembles wing phenotypes of flies expressing non-diffusible HhCD2 (Strigini and Cohen, 1997) or with impaired activity of Hh signaling To better demonstrate protein processing during release, we inverted grayscale blots and colored them (right: green: a-Shh, blue: a-HA). Green signals label untagged or processed Shh, and cyan signals label unprocessed HA-tagged proteins. Higher electrophoretic mobility confirms terminal processing during release. Tagged and untagged palmitoylated proteins are not efficiently released. (b) Compared dual-lipidated, monolipidated and non-lipidated Shh release after 1 hr (left) and 4 hr (right). ***p 0.0001, **p 0.001, n = 3. (c) Release of Shh C25A is downregulated 4-fold upon dual-lipidated Shh coexpression (27.7 ± 4.6% if compared to Shh C25A release alone, which was set to 100%, n = 7, ***p 0.0001). (d) Impaired release of N-terminally HA-tagged HA Shh. a-CW antibodies detect the N-terminal CW motif (KRRHPKK). Bright cellular signals in merged blots denote unprocessed proteins (arrowhead), orange signals denote C-processed/N-unprocessed proteins, and green signals confirm the removal of N-and C-terminal peptides (asterisk). Note Shh HA processing at the CW site during release. By contrast, N-terminal processing of Shh C25S is impaired. (e) Immunoblot analysis of recombinant Hh proteins released into media of transfected Drosophila S2 cells (left). Top row: S2 cells express palmitoylated and non-palmitoylated proteins to comparable levels. Bottom Figure 6 continued on next page components such as Fused or Collier (Col) (Ascano and Robbins, 2004;Vervoort et al., 1999), while the distal 'widening' of L3 (Figure 7c) is consistent with impaired Hh repression of Iroquoisregulated L3 formation (Crozatier et al., 2004). Notably, the observation that HA Hh expression under ptc-control showed only minor effects (Figure 7h,i) confirms cell-autonomous Hh repression by direct HA Hh contacts in mixed clusters, and suggests that palmitoylated HA Hh peptides restrain these mixed clusters at the cell membrane. We therefore expected that additional C > S Figure 6 continued row: S2 cells released high levels of unpalmitoylated Hh C85S and Hh C85S;D86-100 , and lower levels of palmitoylated Hh, into the media. Only very low levels of HA Hh were released in unprocessed form (top band). (f) Intermolecular interactions of Drosophila Hh N-terminal peptides. Right: schematic of the palmitoylated N-terminal 'stem' peptide, including basic CW residues (red) serving as the predicted membrane-proximal cleavage site. (g) Modeled insertion of the HA tag upstream of the N-terminal CW motif (located between Hh residues L91 and G92) of Drosophila Hh. This moves the CW motif nine amino acids more distal to the membrane and replaces its previous position with the HA tag (blue, right). Modeled N-terminal palmitate is shown as a zigzag line (pointing to the right). Yellow spheres denote Drosophila Hh residues corresponding to Shh residues that interact with Ptc (Drosophila Hh H193, H194, H200, H240) (Bosanac et al., 2009). Red spheres denote residues corresponding to Shh amino acids bound by the Shh inhibitory antibody 5E1 (K105, R147, R213, R238, R239 in Drosophila Hh) (Maun et al., 2010). DOI: https://doi.org/10.7554/eLife.33033.015 The following figure supplement is available for figure 6:  mutagenesis, by removing the membrane anchor (Figure 7a), would revert the observed severe mispatterning phenotypes due to impaired cluster release into milder forms caused by partially impaired Hh binding to Ptc, as described earlier. Indeed, additional mutagenesis of the palmitate acceptor cysteine in en > HA Hh C85S flies fully reversed pharate lethality at 25˚C and led to wing phenotypes comparable to those of en >Hh C85S flies (compare Figure 7d with 7 f and Figure 7e with 7 g).

Repressed target gene transcription by N-terminally unprocessed palmitoylated and non-palmitoylated Hh
The Hh gradient emanating from the posterior compartment activates the Hh target genes engrailed (en), collier (col), patched (ptc) and decapentaplegic (dpp) in stripes of anterior cells adjacent to the a/p border. Via Hh-responsive accumulation and nuclear access of Ci 155 , en and col are induced in a 5-to 7 cell wide anterior stripe, ptc in a 10 cell wide stripe and dpp in a 12-15 cell wide stripe, and the presence and width of these stripes of target gene expression is differentially sensitive to Hh dose (Chen and Struhl, 1996;Strigini and Cohen, 1997). Far from the Hh source, Ci 155 is depleted to form the repressor Ci R , and Hh target genes are repressed. Cells receiving minimal amounts of Hh activate dpp transcription, cells receiving an intermediate amount of Hh activate the expression of col and ptc in addition to that of dpp, and Hh-dependent anterior en transcription (but not posterior, Hh-independent en transcription) is located closest to the a/p border (Figure 8a,b). Col in the high and intermediate zones down-regulates Dpp responses: This results in the future L3-L4 intervein (Mohler et al., 2000;Vervoort et al., 1999). We used this system to investigate the impact of our mutant forms of Hh on the expression of en, ptc and dpp. We confirmed that posterior Hh overexpression expanded dpp-LacZ expression anteriorly ( Figure 8c) and, consistent with established en >Hh expansion of the L3-L4 intervein area (Figure 2c), we confirmed that posterior Hh overexpression expanded ptc-LacZ expression in the presumptive L3-L4 region (Figure 8d). En-controlled expression of the HA-tagged protein at 18˚C, in contrast, did not much affect dpp-LacZ expression in the anterior compartment (Figure 8e), but abolished all ptc-LacZ reporter expression and restricted en-expression posteriorly (Figure 8f). This confirms that the complete loss of L3-L4 intervein tissue in adult en > HA Hh wings is caused by insufficient Hh levels at the a/p border, and supports the idea that coexpressed HA Hh impaired Hh release from the posterior compartment of the wing disc. We note that the observed expansion of dpp expression can be best explained by abrogated Ptc-mediated Hh internalization that normally restricts the Hh gradient (Chen and Struhl, 1996). Consistent with our concept of N-palmitate serving as a membrane anchor to prevent unregulated Hh release, HA Hh C85S coexpression restored ptc-LacZ and dpp-LacZ expression (Figure 8g,h) to levels comparable to those detected in Hh C85S expressing wing discs (Figure 8i,j), and additional deletion of the unpalmitoylated N-terminal peptide reverted the expanded area of dpp-LacZ expression to wild-type range (Figure 8k,l). Together, these experiments confirm that N-terminal Hh processing converts the insoluble Hh cluster into truncated, bioactive morphogen, and that the palmitate anchor controls completion of this process.

Dominant-negative HA Hh C85S activity on Ptc binding, but not dominantnegative HA Hh activity, is compensated by increased Hh coexpression
To confirm that impaired processing of palmitoylated Hh variants prevents their solubilization, while impaired processing of unpalmitoylated Hh N-termini affects Ptc receptor binding of soluble clusters (merely reducing their bioactivity), we macroscopically analyzed wings of single and compound transgenic fly lines expressing Hh from the attP 51C landing site on chromosome 2 and HA Hh or HA Hh C85S from one specific attP2 landing site on chromosome 3. As shown earlier, if expressed under en-Gal4 control, Hh and HA Hh C85S strongly affected wing development: En-controlled HA Hh C85S reduced the formation of L3-L4 intervein tissue (Figure 9a), and en >Hh expanded the L3-L4 intervein area (Figure 9b). Targeted coexpression of both proteins fully reverted dominant-negative HA Hh C85S function in 80% of wings and expanded this area in the remaining 20% of wings (56 wings were analyzed, Figure 9c,d). This indicates that increased Hh amounts 'titer out' dominantnegative HA Hh C85S function. In contrast, en >Hh did not significantly correct dominant-negative HA Hh mis-patterning phenotypes. As previously shown, HA Hh expression in the posterior compartment arrested fly development at pupal and pharate stages. All wings of about 4% imagos that hatched (n = 12/320) lacked most anterior structures (Figure 9d,e). Hh coexpression partially reversed pharate lethality (22% imagos hatched, n = 41/182), but all analyzed wings still lacked the complete L3-L4 intervein area (Figure 9d,f). The most likely explanation for this is that increased relative Hh amounts 'dilute' the average number of permanent membrane anchors of any given mixed cluster, with only a limited compensatory effect on Hh release and activity due to the remaining tethers. Figure 8. Effect of different Hh variants on en, dpp-LacZ and ptc-LacZ expression in the wing disc (a,b) Dpp-LacZ (a) and ptc-LacZ (b) reporter gene expression at the a/p border in wild-type third-instar discs. Nuclear b-galactosidase is immunofluorescently labeled (red). Overexpression of CD8-GFP under en-control labels the posterior compartment. Fly larvae developed at 25˚C. The left image is a merge. (c,d) Hh overexpression expands dpp-LacZ and ptc-LacZ expression anteriorly. 4D9 a-engrailed/invected (inv) antibodies label the posterior compartment in this and the following panels (green). Fly larvae developed at 25˚C. (e,f) En-controlled HA Hh overexpression reduced dpp-LacZ expression in the anterior wing disc. Ptc-LacZ expression was always completely abolished, and en/inv expression was restricted to most posterior wing disc regions (arrow). Fly larvae for this and all subsequent analyses developed at 18˚C because wing disc growth arrested at 25˚C, preventing further analysis. (g,h) Additional deletion of the palmitate membrane anchor increased dpp-LacZ expression and also restored a stripe of weak yet expanded ptc-LacZ expression. The expansion of ptc-LacZ and dpp-LacZ domains beyond wild-type levels may be linked to reduced inv/en expression in anterior target cells (note the unchanged posterior restriction of inv/en-expression). (i,j) En-controlled Hh C85S expression leads to comparable dpp-LacZ expression. Ptc-LacZ reporter expression was reverted into more intense and restricted staining, indicating an additional inhibitory effect of the HA-tag. (k,l) Restored wild-type pattern of dpp-LacZ expression and ptc-LacZ expression as a consequence of en-controlled Hh C85S;D86-100 expression shows that expanded dpp-LacZ expression and reduced ptc-LacZ expression in en >Hh C85S and en > HA Hh C85S discs were caused by the unprocessed N-terminal peptide. Wing discs are oriented such that anterior is right and dorsal is up; all magnification, camera and processor settings were kept identical. Scale bar: 100 mm. DOI: https://doi.org/10.7554/eLife.33033.018 We confirmed cell-autonomous Hh repression by using another Gal4-line (34B-Gal4) that drives transgene expression in cells that form the most proximal parts of the wing where hh is normally not expressed (Figure 9g) (Brand and Perrimon, 1993). 34B-Gal4-controlled Hh expression in these cells results in phenotypes resembling a natural hh gain-of-function allele, hh Moonrat (Figure 9g´, arrow) (Tabata and Kornberg, 1994). Phenotypes resulting from ectopic hh Moonrat expression are usually mild, varying between overgrowth of anterior wing tissue to slight disorganization of the wing margin and the addition of extra vein material. We observed that 34B > HA Hh C85S and 34B > HA Hh expression did not affect wing development, confirming spatial disconnection of 34B-directed transgene expression from posterior endogenous Hh production and biological inactivity of both proteins (Figure 9h,i). In compound 34B > Hh; HA Hh C85S wings, the activity of mixed clusters was reduced ( Figure 9j, arrowhead), while it was completely abolished in 34B > Hh; HA Hh wings (Figure 9k,l). This is expected from impaired Ptc-binding of Hh; HA Hh C85S clusters in the former situation versus blocked release of Hh; HA Hh clusters in the latter situation.

Reversed target gene expression recapitulates restored wing development in flies coexpressing Hh and HA Hh C85S
Finally, we investigated the expression of the Hh target gene ptc in flies expressing Hh and HA Hh C85S alone and in combination. As shown earlier, posterior Hh overexpression expanded ptc-LacZ expression (compare Figure 10a with Figure 10b), and en-controlled expression of the HA-tagged nonpalmitoylated protein strongly reduced ptc-LacZ reporter expression (Figure 10c). Consistent with the restored formation of L3-L4 intervein tissue in adult en >Hh; HA Hh C85S wings (Figure 9c), and occasionally gain-of-function in these wings, ptc-LacZ expression in the anterior compartment of the wing disc was expanded (Figure 10d). This shows that coexpressed Hh fully restored dominant-negative HA Hh C85S function by expanding ptc-LacZ target gene expression in the presumptive L3-L4 region in the anterior compartment and demonstrates that receiving cells respond to the morphogen. Figure 10. Combined en >Hh; HA Hh C85S expression restores ptc-LacZ expression in the wing disc. (a) Ptc-LacZ reporter gene expression at the a/p border in wild-type third-instar discs. Nuclear b-galactosidase is immunofluorescently labeled (red). 4D9 a-engrailed/invected (inv) antibodies label the posterior compartment in this and the following panels (green). The left image is a merge. Fly larvae developed at 25˚C. (b) En-controlled Hh overexpression increased and expanded ptc-LacZ expression anteriorly. (c) En-controlled HA Hh C85S overexpression reduced ptc-LacZ expression, as previously shown. (d) En-controlled Hh; HA Hh C85S coexpression generated a stripe of intense expanded ptc-LacZ staining, consistent with the gain-of-function phenotype observed in wings. Wing discs are oriented such that anterior is right and dorsal is up; all magnification, camera and processor settings were kept identical. Scale bar: 100 mm. DOI: https://doi.org/10.7554/eLife.33033.020 Together, these experiments confirm a functional link between Hh lipidation, formation of linear cell surface clusters and proteolytic processing of lipidated N-terminal peptides in vivo. Processing serves to convert the lipidated morphogen cluster at the cell surface into the active form ( Figure 11). Therefore, the N-palmitate membrane anchor and membrane-proximal CW-residues are functionally linked since the palmitoylation ensures quantitative CW-cleavage as a prerequisite for full Hh activation in vivo.

Discussion
It is well established that cell-surface HS chains assist in Hh multimerization as a prerequisite for the generation of light microscopically visible aggregates at the cell surface (Ortmann et al., 2015;Vyas et al., 2008). Here, we provide ultrastructural data showing that a significant fraction of Hh assembles into extended linear arrays, consistent with the long unbranched HS-chain structure that scaffolds Hh clusters (Vyas et al., 2008), observed crystal lattice interactions of the vertebrate Shh ortholog (Pepinsky et al., 1998) and functional in vitro data (Ohlig et al., 2011;Ohlig et al., 2012). By exploiting the Drosophila wing development model which is dependent on differential Hh signaling for the formation of distinct wing structures, we further show that N-terminal peptides can block Ptc-receptor-binding of Hh clusters in vivo. Consistent with this, expression of N-truncated Hh mutants in Drosophila revealed that inhibitory peptide removal unmasks Ptc-binding sites and mediates direct, high threshold tissue patterning (Strigini and Cohen, 1997). Yet, contrary to previous observations on N-truncated Shh (Ohlig et al., 2011), we note that all artificially truncated Hh C85S;D variants were functionally inert. We explain this inactivity by Hh C85S;D misfolding due to possible intramolecular chaperone function of the 84 amino acid N-terminal Hh pre-peptide (Eder and Fersht, 1995) or unproductive Ptc binding of artificially truncated proteins as described for monomeric ShhN (Williams et al., 1999). We currently investigate these possibilities by insertion of a tobacco etch virus (TEV) protease recognition site into the putative Hh target site to allow for sequence-specific Hh C85S cleavage and activation after controlled TEV protease expression in the fly (Harder et al., 2008). We previously showed that proteolytic conversion targets the N-terminal CW-site in vitro (Dierker et al., 2009;Ohlig et al., 2012). We show here that insertion of HA peptides, which displaces this cleavage site distally without affecting Hh N-palmitoylation (Hardy and Resh, 2012) and HSdependent multimerization, is sufficient to impair endogenous and transgenic Hh high threshold biofunction in vivo, apparently without affecting low threshold Dpp-mediated Hh activity. Rescue of Hh biofunction by the additional mutation of the cysteine acceptor shows that N-palmitate anchors the unprocessed peptide to the cell membrane to safeguard Hh release. These findings are consistent with enhanced Drosophila Hh release upon RNAi-mediated knockdown of Hh acyltransferase activity (Chamoun et al., 2001) and increased Shh tethering to cell membranes by palmitate (Konitsiotis et al., 2014;Levental et al., 2010). Importantly, while S-and O-linked palmitate moieties are susceptible to enzymatic deacylation by palmitoyl-protein thioesterases (Kakugawa et al., 2015), amide-linked Hh palmitate is thioesterase resistant. This suggests that Hh relay from posterior subcellular structures -at least at some point -requires proteolytic processing of sheddase-accessible, membrane-proximal terminal target peptides. Support for this idea comes from the published replacement of the C-terminal Hh target peptide with transmembrane-CD2 (Strigini and Cohen, 1997). Resulting Hh-CD2 fusion proteins remain permanently membrane associated and generate wings with one single central vein in the region normally occupied by veins L3 and L4, while leaving Dpp-mediated anterior and posterior wing patterning intact. We note that this phenotype is strikingly similar to the en > HA Hh phenotype described here. Moreover, required Hh transfer between protruding cell-cell contact structures emanating from the Hh-sending and Hh-receiving compartments, called cytonemes, was recently indicated by impaired Ptc signaling and internalization at contact sites with Hh-CD2 (González-Méndez et al., 2017). While the exact mechanism by which Hh is liberated from the posterior cytoneme membrane was not addressed, proteolytic Hh relay and reception at cytoneme contact sites was suggested by the authors, and is supported by the results shown in our work (Figure 1e).
In addition to cytoneme contact sites, other subcellular structures of P-compartment cells release Hh from the membrane (Figure 12). It has been suggested that the Hh gradient in Drosophila wing imaginal discs consists of apical and basolateral secreted pools formed as a consequence of initial apical Hh secretion, subsequent reinternalization, and apical (D'Angelo et al., 2015) or basolateral (Callejo et al., 2011) resecretion, both depending on the endosomal sorting complex required for transport (ESCRT). Pools of Hh and ESCRT proteins are then secreted together into the extracellular space (Gradilla et al., 2014;Matusek et al., 2014;Vyas et al., 2014), Hh being transported on (Bischoff et al., 2013) or inside of (Chen et al., 2017) basolateral cytonemes, or apically released to promote Hh long-range activity (Ayers et al., 2010) (Figure 12). While Hh shedding may target several of these pools, timely and reliable paracrine Hh function through proteolytic release and extracellular apical diffusion alone (Figure 12b'') is difficult to envision for two reasons. First, patterning of folded epithelia, such as the Drosophila imaginal disc, poses a problem if spreading were to occur out of the plane of the epithelial cell layer through diffusion or flow, as this would result in morphogen loss into the peripodial space and loss of long-range Hh function. The second limitation is that it normally takes much time for diffusing molecules to travel long distances away from the source because the timescale of diffusion increases with the square of the distance (Berg, 1993;Müller and Schier, 2011). Cytoneme-or exosome-mediated basolateral transport, followed by proteolytic Hh relay over short distances at membrane contact sites (González-Méndez et al., 2017), would effectively solve both problems, as would the idea of heparan sulfate proteoglycan 'restricted' Hh transport at the apical cell surface (Han et al., 2004). Our future aim is to distinguish between these possibilities. We also aim to characterize the Hh release factor Shifted (Glise et al., 2005), a soluble protein with structural similarities to vertebrate Scube2 sheddase enhancers (Jakobs et al., 2014;Jakobs et al., 2016;Jakobs et al., 2017), to identify the elusive 'Hh sheddase'. Finally, we are currently investigating the important question of whether C-terminal Hh processing contributes to its in vivo biofunction in the wing disc and in other developing tissues requiring Hh signaling over shorter ranges, such as in the developing eye (Ma et al., 1993).
In conclusion, we propose that palmitate-controlled quantitative Hh shedding from the cell surface constitutes an essential step in Hh transmission and high-threshold tissue patterning in vivo. While we have used Drosophila wing development to elucidate this molecular process, we expect our results to also be relevant to other Hh-dependent developmental programs and to Hh liganddependent cancer induction and progression (Amakye et al., 2013). Continued on next page Subsequently, unprocessed lipidated Hh or processed ectodomains diffuse through the fluid-filled peripodial space (labeled blue) to bind to Ptc receptors expressed in the anterior compartment. Another pool of apical cell-surface Hh is internalized and re-secreted apically (D'Angelo et al., 2015) or basolaterally (Callejo et al., 2011) using exosomes (b 000 ) (Matusek et al., 2014) or long cellular protrusions, known as cytonemes, as carriers. Cytonemes can extend from posterior Hh-producing cells to deliver Hh to cell surface receptors on receiving anterior cells in their close vicinity, or can meet 'receiving' cytonemes extending from more distant anterior cells at defined contact sites (b 0000 ) (González-Méndez et al., 2017). Receiving anterior cytonemes that take up Hh from basal subcellular sites of expressing posterior cells for subsequent intracellular transport to the apical pole of anterior epithelial cells have also been described (b 00000 ) (Chen et al., 2017). However, an explanation is needed about how lipidated Hh can 'switch' between sending and receiving cytonemes, or relay from vesicular or cytoneme membranes to their receptors. This problem may be solved by proteolytic Hh processing, resulting in its relay between cytonemes or from producing cell membranes to Ptc receptors on receiving anterior cells. We note that the findings presented in this work do not support the alternative possibility, that is, that different transport modes work in parallel, because HA insertion into the N-terminal Hh processing site abolished ( . These lines were crossed with flies homozygous for UAS-hh or variants thereof. All Hh cDNAs cloned into pUAST-attP were first expressed in Drosophila S2 cells to confirm correct protein processing and secretion. Transgenic flies were generated by using the landing site 51 C1 by Best-Gene or in-house by using strain PhiC31(X); attPVK37; attP2 that possesses the landing sites VK37 and attP2. Cassette exchange was mediated by germ-line-specific phiC31 integrase (Bateman et al., 2006). Ptc-LacZ reporter flies were kindly provided by Jianhang Jia, Markey Cancer Center, and Department of Molecular and Cellular Biochemistry, University of Kentucky College of Medicine, Lexington, USA.

Confocal microscopy
Wing discs were fixed, permeabilized and stained with anti-b-galactosidase antibodies (Cappel, MP Biomedicals) and Cy3-conjugated goat-a-rabbit antibodies (Jackson Immuno Research). Posterior, Hh-producing cells were detected with monoclonal antibodies directed against engrailed (en 4D9, DSHB) and Alexa488-conjugated donkey-a-mouse antibodies (Thermo Fisher). Images were taken on a LSM 700 Zeiss confocal microscope using ZEN software. Maximum intensity projections are shown.

Cloning and expression of recombinant proteins
Hh cDNA (nucleotides 1-1416, corresponding to amino acids 1-471 of D. melanogaster Hh) and HhN cDNA (nucleotides 1-771, corresponding to amino acids 1-257) were inserted into pENTR, sequenced, and cloned into pUAST for protein expression in S2 cells or the generation of transgenic flies. Mutations were introduced by QuickChange Lightning site-directed mutagenesis (Stratagene). Primer sequences and sequence information is shown in Supplementary file 1. S2 cells (RRID: CVCL_Z232) were cultured in Schneider's medium (Invitrogen) supplemented with 10% fetal calf serum (FCS) and 100 mg/ml penicillin/streptomycin. The cells were obtained from C. Klä mbt, University of Mü nster, Germany, and tested negative for mycoplasma. S2 cells were transfected with constructs encoding Hh and HhN variants together with a vector encoding an actin-Gal4 driver by using Effectene (Qiagen) and cultured for 48 hr in Schneider's medium before protein was harvested from the supernatant. Shh constructs were generated from murine cDNA (NM_009170) by PCR (primers are listed in Supplementary file 1). Hh acyltransferase cDNA (NM_018194) was obtained from ImaGenes and cloned into pIRES (ClonTech) for bicistronic Shh/Hh acyltransferase coexpression in the same transfected cells. This resulted in N-palmitoylated, C-cholesterylated proteins. Bosc23 cells (RRID: CVCL_4401) were cultured in Dulbecco's modified Eagle's medium (Lonza) supplemented with 10% FCS and 100 mg/ml penicillin-streptomycin. The cells were obtained from D. Robbins, University of Miami, USA, authenticated via by PCR-single-locus-technology (Eurofins Forensics), and tested negative for mycoplasma. Bosc23 cells were transfected with PolyFect (Quiagen) and cultured for 48 hr, the medium was changed, and Shh was secreted into serum-free medium for the indicated times. All media were ultracentrifuged for 30 min at 125,000 g, and the proteins were TCA precipitated and analyzed by 15% SDS-PAGE and western blotting with polyvinylidene difluoride membranes. Blotted proteins were detected by a-HA antibodies (mouse IgG; Sigma), a-Shh antibodies (goat IgG; R and D Systems), or a-Hh (rabbit IgG, Santa Cruz Biotechnology). Incubation with peroxidase-conjugated donkey-a-goat/rabbit/mouse IgG (Dianova) was followed by chemiluminescent detection (Pierce). Photoshop was used to convert grayscale blots into merged RGB pictures for improved visualization of terminal peptide processing.

Preparation of Drosophila larval lysates
Drosophila third-instar larvae were collected and transferred into a microcentrifuge to which 1 ml lysis buffer was added (PBS containing 1% (v/v) Triton X-100). Larvae were homogenized with a micropestle and the solution was cleared at 15,000 rpm for 15 min at 4˚C. The supernatant was sterile-filtered (45 mm) and transferred into a fresh microcentrifuge tube for gel filtration analysis. All processings were conducted at 4˚C.

Chromatography
Gel filtration analysis was performed on an Ä kta protein purifier (GE Healthcare) on a Superdex200 10/300 GL column (Pharmacia) equilibrated with PBS at 4˚C. Eluted fractions were TCA precipitated and analyzed by SDS-PAGE as described earlier. Signals were quantified by using ImageJ.

Bioanalytical and statistical analysis
Sequence analysis was conducted on the CFSSP secondary structure prediction server (http://www. biogem.org/tool/chou-fasman/). All statistical analyses were performed in GraphPad Prism by using the Student's t test (two-tailed, unpaired, confidence interval 95%). For wing quantifications, 10 male and 10 female wings were analyzed for each data set and ratios between L3-L4 intervein areas and L2-L3 intervein areas determined. All error estimates are standard errors of the mean (SEM).

Immunoelectron microscopy
Shh-expressing Bosc23 cells were fixed overnight at 4˚C in 4% paraformaldehyde/glutaraldehyde, washed in PIPES, and dehydrated in a graded ethanol series (30% EtOH, 4˚C, 45 min; 50% EtOH, À20˚C, 1 hr; 70% EtOH, À20˚C, 1 hr; 90% EtOH, À20˚C, 1.5 hr; 100% EtOH, À20˚C, 1.5 hr; 100% EtOH, À20˚C, 1.5 hr). Dehydrated cells were embedded in Lowicryl K4M embedding medium by using the Lowicryl K4M Polar Kit (Polysciences). Cells were then embedded in gelatin capsules, centrifuged twice for 15 min at 1500 rpm, and incubated overnight at À35˚C. For polymerization, the resin was UV irradiated for 2 days at À35˚C. The embedded samples were cut into 60 nm sections, washed in PBS containing 5% BSA (pH 7.4), and incubated for 2 hr in PBS-BSA containing primary antibodies (a-Shh antibodies from R and D, GeneTex, and Cell Signaling at 1:20 dilution). Samples were washed five times in PBS-BSA and once in Tris-BSA. Secondary antibodies conjugated to 5 nm and 10 nm gold nanoparticles were diluted in Tris-BSA buffer and incubated with the cell sections for 1 hr. Afterwards, samples were washed five times in Tris-BSA and once in dH 2 O. Contrasting was done with 2% uranyl acetate (15 min) and Reynold's lead citrate (3 min). Finally, immunogold-labeled cell sections were analyzed by using a transmission electron microscope (CM10, Philips Electron Optics).

Data availability
The transgenic fly lines Hh-CW (lacking the putative N-terminal Hh processing site), Hh-CW/HA (a variant having this site replaced with a hemagglutinin tag) and HhHS (carrying a C-terminally inserted HA-tag) generated in the course of this study that support the phenotypes described in the manuscript are available upon request from the corresponding author (KG). We plan to publish these new lines separately in the future.