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Paget's disease (PD) is characterized by increased numbers of abnormal osteoclasts (OCLs) that drive exuberant bone formation, but the mechanisms responsible for the increased bone formation remain unclear. We previously reported that OCLs from 70% of PD patients express measles virus nucleocapsid protein (MVNP), and that transgenic mice with targeted expression ofMVNPin OCLs (MVNP mice) develop bone lesions and abnormal OCLs characteristic of PD. In this report, we examined if OCL‐derived sphingosine‐1‐phosphate (S1P) contributed to the abnormal bone formation in PD, since OCL‐derived S1P can act as a coupling factor to increase normal bone formation via binding S1P‐receptor‐3 (S1PR3) on osteoblasts (OBs). We report that OCLs fromMVNP mice and PD patients expressed high levels of sphingosine kinase‐1 (SphK‐1) compared with wild‐type (WT) mouse and normal donor OCLs. SphK‐1 production byMVNP‐OCLs was interleukin‐6 (IL‐6)‐dependent since OCLs fromMVNP/IL‐6^−/−mice expressed lower levels of SphK‐1. Immunohistochemistry of bone biopsies from a normal donor, a PD patient, WT andMVNP mice confirmed increased expression levels of SphK‐1 in OCLs and S1PR3 in OBs of the PD patient andMVNP mice compared with normal donor and WT mice. Further,MVNP‐OCLs cocultured with OBs fromMVNPor WT mice increased OB‐S1PR3 expression and enhanced expression of OB differentiation markers inMVNP‐OBs precursors compared with WT‐OBs, which was mediated by IL‐6 and insulin‐like growth factor 1 secreted byMVNP‐OCLs. Finally, the addition of an S1PR3 antagonist (VPC23019) to WT orMVNP‐OBs treated with WT andMVNP‐OCL‐conditioned media (CM) blocked enhanced OB differentiation ofMVNP‐OBs treated withMVNP‐OCL‐CM. In contrast, the addition of the SIPR3 agonist, VPC24191, to the cultures enhanced osterix and Col‐1A expression inMVNP‐OBs treated withMVNP‐OCL‐CM compared with WT‐OBs treated with WT‐OCL‐CM. These results suggest that IL‐6 produced by PD‐OCLs increases S1P in OCLs and S1PR3 on OBs, to increase bone formation in PD.