An ATZ derivative is a compound formed during the Edman Degradation process when phenylisothiocyanate reacts with the N-terminal amino acid of a peptide, resulting in a phenylthiohydantoin (PTH)-amino acid. This reaction facilitates the sequential identification of amino acids in a peptide chain by allowing for the cleavage and identification of the N-terminal amino acid without disrupting the rest of the peptide chain.