bash loop to replace middle of string after a certain character

I think you were very close to a working command. This worked for me on the few examples you gave:

sed -E 's/_[0-9]+ /|/' "$file" > "$file.1"

• I changed the match expression from _.* to _[0-9]+ to limit the match to only the underscore, numeric digits, and space character.
• I removed the $ because that matches at the end of the line, not the end of the first word.
• I changed the end of the substitute command from /g to / because your examples have only one place in each line that needs editing, rather than multiple places.
• Also, rather use -E than -r for extended regular expressions, as the former is more compatible with other versions of sed; and quote the variable expansions in case any filenames contain whitespace or special characters.

Use this Perl one-liner:

perl -pe 's{^(>\S+?)(_\d+)?\s+(.*)}{$1|$3}' "$file" > "$file.1"

The Perl one-liner uses these command line flags:
-e : Tells Perl to look for code in-line, instead of in a file.
-p : Loop over the input one line at a time, assigning it to $_ by default. Add print $_ after each loop iteration.

(...) : capture group, which can be referred to later as $1, $2, etc.
\S+? : one or more non-whitespace characters, non-greedy.
(_\d+)? : optional matched group that consists of underscore followed by 1 or more digits.
\s+ : 1 or more whitespace characters.
(.*) : any character, repeated 0 or more times.

SEE ALSO:
perldoc perlrun: how to execute the Perl interpreter: command line switches
perldoc perlre: Perl regular expressions (regexes)
perldoc perlre: Perl regular expressions (regexes): Quantifiers; Character Classes and other Special Escapes; Assertions; Capture groups
perldoc perlrequick: Perl regular expressions quick start

Here's a simple perl one-liner that will find the first _ that occurs on lines beginning with a > and then one or more non-whitespace characters (\S), and remove all non-whitespace characters after that _ and any whitespace characters after them:

$ perl -pe 's/^(>\S+)_\S+\s*/$1|/' file
>GENOME1|HYPOTHETICAL PROTEIN A
NQFTIAQSQVGLEDALLDL

>GENOME1|HYPOTHETICAL PROTEIN B
NQFTIAQSQVGLEDALLDL

>GENOME1|HYPOTHETICAL PROTEIN C
NQFTIAQSQVGLEDALLDL

You can do the same basic thing with GNU sed as well:

$ sed -E 's/^(>\S+)_\S+\s*/\1|/' file
>GENOME1|HYPOTHETICAL PROTEIN A
NQFTIAQSQVGLEDALLDL

>GENOME1|HYPOTHETICAL PROTEIN B
NQFTIAQSQVGLEDALLDL

>GENOME1|HYPOTHETICAL PROTEIN C
NQFTIAQSQVGLEDALLDL

And with any sed:

$ sed 's/^\(>[^[:blank:]]*\)_[^[:blank:]]*[[:blank:]]*/\1\|/' file
>GENOME1|HYPOTHETICAL PROTEIN A
NQFTIAQSQVGLEDALLDL

>GENOME1|HYPOTHETICAL PROTEIN B
NQFTIAQSQVGLEDALLDL

>GENOME1|HYPOTHETICAL PROTEIN C
NQFTIAQSQVGLEDALLDL

Using Raku (formerly known as Perl_6)

raku -pe 's/^ (\>\S+) _ \S+\s* /$0|/;'     

Above is very similar to the nice Perl answer posted by @terdon.

Note, you could try deleting the _00001 sequence (or similar digits) directly. Below uses Raku's <(…)>capture markers, which allow matches in the left-half of the substitution operator, but drops matching elements outside the markers before replacement such that only the _ \d+ \s+ elements are replaced by | in the right-half of the substitution operator:

raku -pe 's/^ \>\S+ <(_ \d+ \s+)> /|/;' 

Sample Input:

>GENOME1_00001 HYPOTHETICAL PROTEIN A
NQFTIAQSQVGLEDALLDL

>GENOME1_00002 HYPOTHETICAL PROTEIN B
NQFTIAQSQVGLEDALLDL

>GENOME1_00003 HYPOTHETICAL PROTEIN C
NQFTIAQSQVGLEDALLDL

Sample Output:

>GENOME1|HYPOTHETICAL PROTEIN A
NQFTIAQSQVGLEDALLDL

>GENOME1|HYPOTHETICAL PROTEIN B
NQFTIAQSQVGLEDALLDL

>GENOME1|HYPOTHETICAL PROTEIN C
NQFTIAQSQVGLEDALLDL

https://raku.org

I don't know why everybody gives code of some other language when you have specifically asked for bash.

Use bash's inbuilt variable expansion facility for this, it is much faster than calling an external program like sed for every filename. For only few names this does not matter much, but it can add up for a large number of files.

The code

#!/bin/bash

for file in "GENOME1_00001 HYPOTHETICAL PROTEIN A" "GENOME1_00002 HYPOTHETICAL PROTEIN B" "GENOME1_00003 HYPOTHETICAL PROTEIN C"
  do
     echo -n $file
     new_name="${file%_*}|HYPOTHETICAL PROTEIN ${file##*EIN }"
     echo " -> ${new_name}"
  done

which calls no external tools, yields the output

GENOME1_00001 HYPOTHETICAL PROTEIN A -> GENOME1|HYPOTHETICAL PROTEIN A
GENOME1_00002 HYPOTHETICAL PROTEIN B -> GENOME1|HYPOTHETICAL PROTEIN B
GENOME1_00003 HYPOTHETICAL PROTEIN C -> GENOME1|HYPOTHETICAL PROTEIN C

as you asked for.

As explained in the comment, I was assuming the '>' at the beginning of the line was some kind of prompt, and only those lines are to be converted. IMHO it's fairly trivial to modify the code to accommodate Sotto Voce's objection, but then again, maybe, it's not. Here is a version that deals with all lines, as Sotto Voce requests. Note I have converted the input data to a here-document, and, like before, for efficiency no external tools are called.

#!/bin/bash

while read line
  do
     if [ "${line%%GENOME1_*}" = ">" ]; then
          line="${line%_*}|HYPOTHETICAL PROTEIN ${line##*EIN }"
       fi
     echo "${line}"
  done << etc
>GENOME1_00001 HYPOTHETICAL PROTEIN A
NQFTIAQSQVGLEDALLDL

>GENOME1_00002 HYPOTHETICAL PROTEIN B
NQFTIAQSQVGLEDALLDL

>GENOME1_00003 HYPOTHETICAL PROTEIN C
NQFTIAQSQVGLEDALLDL

etc

This is the output:

>GENOME1|HYPOTHETICAL PROTEIN A
NQFTIAQSQVGLEDALLDL

>GENOME1|HYPOTHETICAL PROTEIN B
NQFTIAQSQVGLEDALLDL

>GENOME1|HYPOTHETICAL PROTEIN C
NQFTIAQSQVGLEDALLDL