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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

OR

		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

001-33357

(Commission file number)

PROTALIX BIOTHERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

972-4-988-9488

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. (See definition of ‘‘large accelerated filer’’ and ‘‘accelerated filer’’ in Rule 12b-2 of the Exchange Act). (check one):

Large accelerated filer               Accelerated filer               Non-accelerated filer   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No

On November 13, 2007, approximately 75,685,318 shares of the Registrant’s common stock, $0.001 par value, were outstanding.

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FORM 10-Q

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Except where the context otherwise requires, the terms, ‘‘we’’, ‘‘us’’, ‘‘our’’ or ‘‘the Company,’’ refer to the business of Protalix BioTherapeutics, Inc. and its consolidated subsidiaries, and ‘‘Protalix’’ or ‘‘Protalix Ltd.’’ refers to the business of Protalix Ltd., our wholly-owned subsidiary and sole operating unit.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The statements set forth under the captions ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations,’’ and ‘‘Risk Factors’’, and other statements included elsewhere in this Quarterly Report on Form 10-Q, which are not historical, constitute ‘‘forward-looking statements’’ within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding our expectations, beliefs, intentions or strategies for the future. When used in this report, the terms ‘‘anticipate,’’ ‘‘believe,’’ ‘‘estimate,’’ ‘‘expect’’ and ‘‘intend’’ and words or phrases of similar import, as they relate to us or our subsidiary or our management, are intended to identify fo rward-looking statements. We intend that all forward-looking statements be subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as may be required under applicable law. Forward-looking statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements.

Examples of the risks and uncertainties include, but are not limited to the following:

	•	the inherent risks and uncertainties in developing drug platforms and products of the type we are developing;

	•	delays in our preparation and filing of applications for regulatory approval;

	•	delays in the approval or potential rejection of any applications we file with the United States Food and Drug Administration, or other regulatory authorities;

	•	any lack of progress of our research and development (including the results of clinical trials we are conducting);

	•	obtaining on a timely basis sufficient patient enrollment in our clinical trials;

	•	the impact of development of competing therapies and/or technologies by other companies;

	•	our ability to obtain additional financing required to fund our research programs;

	•	the risk that we will not be able to develop a successful sales and marketing organization in a timely manner, if at all;

	•	our ability to establish and maintain strategic license, collaboration and distribution arrangements and to manage our relationships with collaborators, distributors and partners;

	•	potential product liability risks and risks of securing adequate levels of product liability and clinical trial insurance coverage;

	•	the availability of reimbursement to patients from health care payors for procedures in which our products are used;

	•	the possibility of infringing a third party’s patents or other intellectual property rights;

	•	the uncertainty of obtaining patents covering our products and processes and successfully enforcing them against third parties; and

	•	the possible disruption of our operations due to terrorist activities and armed conflict, including as a result of the disruption of the operations of regulatory authorities, our subsidiary, our manufacturing facilities and our customers, suppliers, distributors, collaborative partners, licensees, and clinical trial sites.

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In addition, companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials, even after obtaining promising earlier trial results. These and other risks and uncertainties are detailed in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2006 and described from time to time in our future reports filed with the Securities and Exchange Commission. We undertake no obligation to update, and we do not have a policy of updating or revising, these forward-looking statements.

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PART I — FINANCIAL INFORMATION

Item 1.    Financial Statements

PROTALIX BIOTHERAPEUTICS, INC.
(A development stage company)
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)

*	See Note 1a.

The accompanying notes are an integral part of the condensed consolidated financial statements.

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PROTALIX BIOTHERAPEUTICS, INC.
(A development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share amounts)
(Unaudited)

*	Incorporation date, see Note 1a.

**	Represents an amount less than $0.01.

The accompanying notes are an integral part of the condensed consolidated financial statements.

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PROTALIX BIOTHERAPEUTICS, INC.
(A development stage company)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(U.S. dollars in thousands, except share data)

*	Represents an amount less than $0.01.

(1)	Incorporation date, see Note 1a.

(2)	Common Stock, $0.001 par value; Authorized – as of December 31, 2006 and September 30, 2007 – 150,000,000 shares.

(3)	The Company issued a total of 8,000 shares of restricted Common Stock in respect of services provided by a member of the Company’s Scientific Advisory Board. (See also Note 2(d)).

The accompanying notes are an integral part of the condensed consolidated financial statements.

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PROTALIX BIOTHERAPEUTICS, INC.
(A development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
(Unaudited)

*	Incorporation date, see Note 1a.

**	Represents an amount less than $1.

The accompanying notes are an integral part of the condensed consolidated financial statements.

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PROTALIX BIOTHERAPEUTICS, INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
(Unaudited)

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES

a.	General

Protalix BioTherapeutics, Inc. (formerly Orthodontix, Inc.) (hereinafter, the ‘‘Company’’), through its wholly-owned subsidiary, Protalix Ltd., is a clinical stage biopharmaceutical company focused on the development and commercialization of recombinant therapeutic proteins based on its proprietary ProCellEx™ protein expression system. Using its ProCellEx system, the Company is developing a pipeline of proprietary recombinant therapeutic proteins based on its plant cell-based expression technology that target large, established pharmaceutical markets and that rely upon known biological mechanisms of action. The Company’s current commercial focus has been on complex therapeutic proteins, including proteins for the treatment of genetic disorders, such as Gaucher disease and Fabry disease, and female infertility disorders. The Company’s business is located in Carmiel, Israel.

On December 31, 2006, the Company consummated the acquisition of Protalix Ltd., a privately-held Israeli biotechnology company incorporated on December 27, 1993, by the merger (the ‘‘Merger’’) of its wholly-owned subsidiary, Protalix Acquisition Co., Ltd., with Protalix Ltd. As a result, Protalix Ltd. is now the Company’s wholly-owned subsidiary, with the former shareholders of Protalix Ltd. acquiring in excess of 99% of the Company’s outstanding shares of common stock, par value $0.001 per share (the ‘‘Common Stock’’) at the closing of the Merger. For accounting purposes, the Merger was treated as a recapitalization of Protalix Ltd. Accordingly, the historical financial statements of the Company reflect the historical operations and financial statements of Protalix Ltd.

The Company has been in the development stage since inception. The successful completion of the Company’s development program and its transition to commercial operations, if at all, is dependent upon obtaining necessary regulatory approvals from the United States Food and Drug Administration (‘‘FDA’’) prior to selling its products within the United States, and foreign regulatory approvals must be obtained to sell its products internationally. There can be no assurance that the Company’s products will receive regulatory approvals, and a substantial amount of time may pass before the Company achieves a level of sales adequate to support the Company operations, if at all. The Company will also incur substantial expenditures in connection with the regulatory approval process and it will need to raise additional capital during the developmental period. Obtaining marketing approval will be directly dependent on the Company’s a bility to implement the necessary regulatory steps required to obtain marketing approval in the United States and other countries and the success of the Company’s clinical trials. The Company cannot predict the outcome of these activities.

Based on its current cash resources and commitments, which includes the proceeds of an underwritten public offering consummated by the Company on October 25, 2007 (see Note 3 below), the Company believes it should be able to maintain its planned research, operating and capital needs for at least the next 24 months. However, the Company currently does not have sufficient resources to complete the commercialization of all of its currently proposed products.

b.	Share Based Compensation

For purposes of determining the fair value of the outstanding options and shares of restricted Common Stock held by non-employees that vested during during the fiscal quarter ended September 30, 2007, the Company’s management used $5.00 per share, which was the public offering price of the shares of Common Stock sold in the underwritten public offering consummated by the Company on October 25, 2007 (see Note 3 below).

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PROTALIX BIOTHERAPEUTICS, INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
(Unaudited)

c.    General Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (‘‘GAAP’’) for interim financial information, Statement of Financial Accounting Standards (‘‘SFAS’’) No. 7, ‘‘Accounting and Reporting by Development Stage Enterprises’’, and Article 10 of Regulation S-X under the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (of a normal recurring nature) considered necessary for a fair statement of the results for the interim periods presented have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in the Annual Report on Form 10-K, as amended, for the year ended December 31, 2006, filed by the Company with the Securities and Exchange Commission. The comparative balance sheet at December 31, 2006 has been derived from the audited financial statements at that date, but does not include all of the information and notes required under GAAP for complete financial statements.

d.    Net Loss per share

Basic and diluted loss per share are computed (in accordance with SFAS No. 128 ‘‘Earnings per Share’’) by dividing net loss by the weighted average number of shares of Common Stock outstanding for each period. Shares of restricted Common Stock, and the shares of Common Stock underlying outstanding options and warrants of the Company, were not included in the computation of diluted loss per share because the effect would be anti-dilutive.

The total weighted average number of shares of Common Stock underlying the convertible preferred shares (on a pre-exchange basis) which have been excluded from the calculations of diluted loss per share were 372,155 and 319,259 for the nine months and for the three months ended September 30, 2006, respectively, and none for each of the nine months and the three months ended September 30, 2007.

The diluted loss per share does not include options, restricted Common Stock and warrants of the Company in the amount of 15,394,256 and 12,233,626 for the nine months ended September 30, 2006 and 2007, respectively, and 16,188,214 and 11,887,934 for the three months ended September 30, 2006 and 2007, respectively.

e.	Newly issued and recently adopted Accounting Pronouncements

	1)	In June 2006, the FASB issued FASB Interpretation (‘‘FIN’’) No. 48, ‘‘Accounting for Uncertainty in Income Taxes’’ (‘‘FIN 48’’), an interpretation of SFAS 109, ‘‘Accounting For Income Taxes.’’ FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements tax positions taken or expected to be taken on a tax return, including a decision whether to file or not to file in a particular jurisdiction. FIN 48 is effective for fiscal years beginning after December 15, 2006 (January 1, 2007 for the Company). The Company adopted FIN 48 on January 1, 2007. The adoption did not have a ny impact on the Company’s financial statements.

	2)	In September 2006, the FASB issued SFAS No. 157, ‘‘Fair Value Measurements’’ (‘‘SFAS 157’’). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. The provisions of SFAS 157 are effective for the fiscal year beginning after September 1, 2008. The Company is currently evaluating the impact of the provisions of SFAS 157 on its financial position and results of operations.

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PROTALIX BIOTHERAPEUTICS, INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
(Unaudited)

	3)	On February 15, 2007, the FASB issued SFAS No. 159, ‘‘The Fair Value Option for Financial Assets and Financial Liabilities’’ (‘‘SFAS 159’’). Under SFAS 159, the Company may elect to report financial instruments and certain other items at fair value on a contract-by-contract basis with changes in value reported in earnings. This election is irrevocable. SFAS 159 provides an opportunity to mitigate volatility in reported earnings that is caused by measuring hedged assets and liabilities that were previously required to use a different accounting method than the related hedging contracts when the complex provisions of SFAS 133 hedge accounting are not met. SFAS 159 is effective for yea rs beginning after November 15, 2007. The Company is currently evaluating the impact of adopting SFAS 159 on its financial position, cash flows, and results of operations.

	4)	In June 2007, the Emerging Issues Task Force (‘‘EITF’’) issued EITF 07-3, ‘‘Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities’’ (‘‘EITF 07-3’’). EITF 07-3 addresses the diversity that exists with respect to the accounting for the non-refundable portion of a payment made by a research and development entity for future research and development activities. The EITF concluded that an entity must defer and capitalize non-refundable advance payments made for research and development activities until the related goods are delivered or the related services are performed. EITF 07-3 is effective for interim or annu al reporting periods in fiscal years beginning after December 15, 2007 (January 1, 2008 for the Company). The Company is currently evaluating the impact of adopting EITF 07-03 on its financial statements and results of operations.

NOTE 2 — STOCK TRANSACTIONS

a.

At the closing of the Merger and in accordance with a share purchase agreement entered into in August 2006, the Company issued to Phillip Frost, M.D., and Jane H. Hsiao, Ph.D., both of whom subsequently became directors of the Company, and to one other investor that provides consulting services to the Company, options that are exercisable into 2.5%, 0.5% and 0.5%, respectively, of the Company’s issued and outstanding Common Stock on a fully-diluted basis immediately after the closing of the Merger in consideration for services provided to the Company, including the services provided by each of Dr. Frost and Dr. Hsiao as directors. The options originally vested ratably over a period of 2.5 years, 20% for each six month period while th e options are outstanding, commencing upon and subject to certain events (as to changes of the vesting terms see below). The options are exercisable for a ten-year period commencing upon the date of grant. The exercise price of each option is $16.70. The options granted to the directors are accounted for as options granted to employees and the options granted to the other investor are accounted for as options granted to consultants.

In February 2007, the Company’s board of directors approved certain modifications to the vesting periods of such options. The options vest as follows: 40% of the options shall vest on March 1, 2008, and an additional 15% of the options shall vest in four equal installments on each of the following dates: June 30, 2008, December 31, 2008, June 30, 2009, and September 30, 2009.

Modification of the terms of an award is treated as an exchange of the original award for a new award, resulting in the incurrence of additional compensation cost for that incremental value. The incremental value is measured by the difference between (a) the fair value of the modified option and (b) the value of the old option immediately before its terms are modified. The modification had no effect on the accounting records of the Company.

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PROTALIX BIOTHERAPEUTICS, INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
(Unaudited)

b.	On January 31, 2007, certain warrant holders exercised, in the aggregate, warrants to purchase 3,875,416 shares of Common Stock with an aggregate exercise price of $5,333. Such warrants were issued in connection with the share purchase agreement entered into in August 2006 by such warrant holders.

c.	In May 2007, the Company’s board of directors approved the grant of options to purchase 204,351 shares of Common Stock to a newly-hired officer of the Company, at an exercise price of $4.33 per share. The options vest over a four-year period and are exercisable for a ten-year period commencing on the date of grant.

The Company estimated the fair value of the options on the date of the grant using the Black-Scholes option-pricing model to be approximately $5,790, based on the following assumptions: dividend yield of 0% for all years; expected volatility of 53.17%; risk-free interest rates of 4.77%; and expected life of six years.

d.	In May 2007, the Company’s board of directors approved the grant of 8,000 shares of restricted Common Stock to a new member of its Scientific Advisory Board. The shares vest as follows: 25% vest 12 months after the grant date and the remaining 75% of the shares vest over three years in 36 equal monthly installments.

The Company presents restricted Common Stock as ‘‘issued’’ and ‘‘outstanding’’ in its financial statements.

The estimate fair value of the restricted shares on the date of grant was approximately $215.

e.	In July and August 2007, certain former employees of the Company exercised outstanding stock options, which were granted under the Company’s 2006 Stock Incentive Plan, for a total of 20,137 shares of Common Stock for aggregate consideration of $3.

NOTE 3 — SUBSEQUENT EVENT

On October 25, 2007, the Company issued and sold 10,000,000 shares of Common Stock in an underwritten public offering at a price of $5.00 per share. In addition, the underwriters have an option to purchase an additional 1,500,000 shares of Common Stock at the public offering price, within 30 days of the offering. The net proceeds to the Company were approximately $46.0 million after deducting underwriting discounts and commissions and offering expenses.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed financial statements and the consolidated financial statements and the related notes included elsewhere in this Form 10-Q and our Annual Report on Form 10-K, as amended, for the year ended December 31, 2006. Some of the information contained in this discussion and analysis, particularly with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should read ‘‘Risk Factors’’ in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2006 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discus sion and analysis.

Overview

We are a biopharmaceutical company focused on the development and commercialization of recombinant therapeutic proteins based on ProCellEx, our proprietary protein expression system. Using our ProCellEx protein expression system, we are developing a pipeline of proprietary recombinant therapeutic proteins based on our plant cell-based expression technology that target large, established pharmaceutical markets and that rely upon known biological mechanisms of action. Our initial commercial focus has been on complex therapeutic proteins, including proteins for the treatment of genetic disorders, such as Gaucher disease and Fabry disease, and female infertility disorders. We believe our ProCellEx protein expression system will enable us to develop proprietary recombinant proteins that are therapeutically equivalent or superior to existing recombinant proteins currently marketed for the same indications. Because we are targeting biologically equivalent versions of h ighly active, well-tolerated and commercially successful therapeutic proteins, we believe our development process is associated with relatively less risk compared to other biopharmaceutical development processes for novel therapeutic proteins. 

Our lead product development candidate is prGCD for the treatment of Gaucher disease, which we are developing using our ProCellEx protein expression system. We received authorization from the FDA in April 2007 to commence a pivotal phase III clinical trial of prGCD and subsequently submitted to the FDA a request for a special protocol assessment (SPA) of the final design of the pivotal phase III clinical trial. In July 2007, we reached an agreement with the FDA on the final design that we submitted in the SPA request and in the third quarter of 2007, we initiated enrollment and treatment of patients in our phase III clinical trial of prGCD. prGCD is our proprietary recombinant form of Glucocerebrosidase (GCD), an enzyme naturally found in human cells that is mutated or deficient in patients with Gaucher disease. The current standard of care for Gaucher disease is enzyme replacement therapy, a medical treatment in which GCD is replaced for patients in w hom the enzyme is lacking or dysfunctional. Although Gaucher is a relatively rare disease, it represents a large commercial market due to the severity of the symptoms and the chronic nature of the disease. The annual worldwide sales of Cerezyme, an enzyme replacement therapy produced by Genzyme and currently the only approved enzyme replacement therapy for Gaucher disease, were approximately $1 billion in 2006, and $546.8 million for the six months ended June 30, 2007, according to public reports by Genzyme. 

In addition to prGCD, we are developing an innovative product pipeline using our ProCellEx protein expression system, including therapeutic protein candidates for the treatment of Fabry disease and female infertility disorders. We plan to file an investigational new drug application (IND) with the FDA with respect to at least one additional product during 2008. Because these product candidates are based on well-understood proteins with known biological mechanisms of action, we believe we may be able to reduce the development risks and time to market for such product candidates. We hold the worldwide commercialization rights to our proprietary development candidates and we intend to establish an internal, commercial infrastructure and targeted sales force to market our products, if approved, in North America, the European Union and in other significant markets, including Israel. 

Our business is conducted by our wholly owned subsidiary, Protalix Ltd., which we acquired through a reverse merger transaction effective December 31, 2006. The accounting treatment for the

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merger transaction was a recapitalization and as such the results of operations discussed below are those of Protalix Ltd. Prior to the merger transaction, we had not conducted any operations for several years. Protalix Ltd. was originally incorporated in Israel in December 1993. Since its inception in December 1993, Protalix Ltd. has generated significant losses in connection with its research and development, including the clinical development of prGCD. At September 30, 2007, we had an accumulated deficit of $37.9 million. Since we do not generate revenue from any of our product candidates, we expect to continue to generate losses in connection with the continued clinical development of prGCD and the research and development activities relating to our technology and other drug candidates. Such research and development activities are budgeted to expand over time and will require further resources if we are to be successful. As a result, we believe that our operating losses are likely to be substantial over the next several years. We will need to obtain additional funds to further develop our research and development programs.

Critical Accounting Policies

Our significant accounting policies are described in Note 1 to our condensed consolidated financial statements appearing at the beginning of this Quarterly Report on Form 10-Q.

Results of Operations

Three months ended September 30, 2007 compared to the three months ended September 30, 2006

Research and Development Expenses

Research and development expenses were $3.8 million for the three months ended September 30, 2007, an increase of $1.7 million, or approximately 81%, from $2.1 million for the three months ended September 30, 2006. The increase resulted primarily from a $914,000 increase in salaries for new and existing employees and related consulting and materials associated with research and development and from a $678,000 increase in share-based compensation resulting primarily from a grant made during the three months ended June 30, 2007 to a newly hired executive officer.

We expect research and development expenses to continue to increase as we enter into more advanced stages of clinical trials for our product candidates, especially with respect to the current phase III clinical trial of prGCD.

General and Administrative Expenses

General and administrative expenses were $2.0 million for the three months ended September 30, 2007, an increase of $909,000, or approximately 83%, from $1.1 million for the three months ended September 30, 2006. The increase resulted primarily from a $524,000 increase in share-based compensation resulting from the increase in the fair value of the Common Stock underlying the portions of certain outstanding stock options granted to consultants that vested during the three-month period ended September 30, 2007, and due to certain grants made during the third and fourth quarters of 2006. In addition, the increase resulted, in part, from a $206,000 increase in legal and accounting expenses in the three months ended September 30, 2007.

Financial Expenses and Income

Financial income was $685,000 for the three months ended September 30, 2007, an increase of $647,000, compared to a financial expense of $38,000 for the three months ended September 30, 2006. The increase resulted primarily from the interest income earned on the proceeds generated from the sale of ordinary shares of Protalix Ltd. in September 2006 and on the proceeds generated from the exercise of certain warrants in January 2007.

Nine months ended September 30, 2007 compared to the nine months ended September 30, 2006

Research and Development Expenses

Research and development expenses were $9.5 million for the nine months ended September 30, 2007, an increase of $4.7 million, or 100%, from $4.8 million for the nine months ended

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September 30, 2006. The increase resulted primarily from a $2.9 million increase in salaries for new and existing employees and related consulting and materials associated with research and development. In addition, the increase resulted from a $1.5 million increase in share-based compensation resulting primarily from a grant made during the three months ended June 30, 2007 to a newly hired executive officer.

We expect research and development expenses to continue to increase as we enter into more advanced stages of clinical trials for our product candidates, especially with respect to the current phase III clinical trial of prGCD.

General and Administrative Expenses

General and administrative expenses were $10.5 million for the nine months ended September 30, 2007, an increase of $7.7 million, or approximately 275%, from $2.8 million for the nine months ended September 30, 2006. The increase resulted primarily from a $6.4 million increase in share-based compensation resulting from the increase in the fair value of the Common Stock underlying the portions of certain outstanding stock options granted to consultants that vested during the nine month period ended September 30, 2007. In addition, the increase resulted, in part, from a $917,000 increase in legal and accounting expenses.

Financial Expenses and Income

Financial income was $1.2 million for the nine months ended September 30, 2007, an increase of $1.1 million, compared to $73,000 for the nine months ended September 30, 2006. The increase resulted primarily from the interest income earned on the proceeds generated from the sale of ordinary shares of Protalix Ltd. in September 2006 and on the proceeds generated from the exercise of certain warrants in January 2007.

Liquidity and Capital Resources

Sources of Liquidity

As a result of our significant research and development expenditures and the lack of any approved products to generate product sales revenue, we have not been profitable and have generated operating losses since our inception. To date, we have funded our operations primarily with gross proceeds equal to $31.3 million from the sale of convertible preferred and ordinary shares of Protalix Ltd. and an additional $14.4 million in connection with the exercise of warrants issued in connection with the sale of such preferred and ordinary shares. On October 25, 2007, we generated $46.5 million in connection with an underwritten public offering. We believe that the funds currently available to us are sufficient to satisfy our planned research, operating and capital needs for at least the next 24 months.

Cash Flows

Net cash used in operations was $6.6 million for the nine months ended September 30, 2007. The net loss for the nine months ended September 30, 2007 of $17.4 million includes $10.2 million of non-cash share-based compensation. Net cash used in investing activities for the nine months ended September 30, 2007 was $1.1 million and consisted primarily of purchases of property and equipment. Net cash provided by financing activities for the nine months ended September 30, 2007 was $12.8 million, consisting of the proceeds from the exercise of certain warrants in January 2007.

Net cash used in operations was $3.3 million for the nine months ended September 30, 2006. The net loss for the three months ended September 30, 2006 of $5.9 million was mainly offset by $2.3 million of non-cash share-based compensation. Net cash used in investing activities for the nine months ended September 30, 2006 was $717,000 and consisted primarily of purchases of property and equipment.

Future Funding Requirements

We expect to incur losses from operations for the foreseeable future. We expect to incur increasing research and development expenses, including expenses related to the hiring of personnel

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and additional clinical trials. We expect that general and administrative expenses will also increase as we expand our finance and administrative staff, add infrastructure, and incur additional costs related to being a public company in the United States, including the costs of directors’ and officers’ insurance, investor relations programs, and increased professional fees. In addition, we are considering a new manufacturing facility that would meet the FDA requirements for the manufacture of our product candidates, which would increase our capital expenditures significantly.

We believe that our existing cash and cash equivalents, after giving effect to the proceeds we received in connection with our underwritten public offering on October 25, 2007, will be sufficient to enable us to fund our planned research, operating and capital needs for at least the next 24 months.

We will need to finance our future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. We currently do not have any commitments for future external funding.

Effects of Inflation and Currency Fluctuations

Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation has had a material effect on our results of operations during the nine months ended September 30, 2007 or the nine months ended September 30, 2006.

Currency fluctuations could affect us by increased or decreased costs mainly for goods and services acquired outside of Israel. We do not believe currency fluctuations have had a material effect on our results of operations during the nine months ended September 30, 2007 or the nine months ended September 30, 2006.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements as of September 30, 2007 or September 30, 2006.

Recently Issued Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, ‘‘Fair Value Measurements’’ (‘‘SFAS 157’’). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. The provisions of SFAS 157 are effective for the fiscal year beginning after September 1, 2008. We are currently evaluating the impact of the provisions of SFAS 157 on its financial position and results of operations.

On February 15, 2007, the FASB issued SFAS No. 159, ‘‘The Fair Value Option for Financial Assets and Financial Liabilities’’ (‘‘SFAS 159’’). Under SFAS 159, we may elect to report financial instruments and certain other items at fair value on a contract-by-contract basis with changes in value reported in earnings. This election is irrevocable. SFAS 159 provides an opportunity to mitigate volatility in reported earnings that is caused by measuring hedged assets and liabilities that were previously required to use a different accounting method than the related hedging contracts when the complex provisions of SFAS 133 hedge accounting are not met. SFAS 159 is effective for years beginning after November 15, 2007. We are currently evaluating the impact of adopting SFAS 159 on our financial position, cash flows and results of operations.

In June 2007, the Emerging Issues Task Force (‘‘EITF’’) issued EITF 07-3, ‘‘Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities’’ (‘‘EITF 07-3’’). EITF 07-3 addresses the diversity that exists with respect to the accounting for the non-refundable portion of a payment made by a research and development entity for future research and development activities. The EITF concluded that an entity must defer and capitalize non-refundable advance payments made for research and development activities until the related goods are delivered or the related services are performed. EITF 07-3 is effective for interim or annual reporting periods in fiscal years beginning after December 15, 2007 (January 1, 2008 for our company). We are currently evaluating the impact of adopting EITF 07-03 on our financial statements and re sults of operations.

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Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Currency Exchange Risk

The currency of the primary economic environment in which our operations are conducted is the dollar. We are currently in the development stage with no significant source of revenues; therefore we consider the currency of the primary economic environment to be the currency in which we expend cash. Most of our expenses and capital expenditures are incurred in dollars, and a significant source of our financing has been provided in U.S. dollars. Since the dollar is our functional currency, monetary items maintained in currencies other than the dollar are remeasured using the rate of exchange in effect at the balance sheet dates and non-monetary items are remeasured at historical exchange rates. Revenue and expense items are remeasured at the average rate of exchange in effect during the period in which they occur. Foreign currency translation gains or losses are recognized in the statement of operations.

Approximately 50% of our costs, including salaries, expenses and office expenses, are incurred in New Israeli Shekels, the NIS. Inflation in Israel may have the effect of increasing the U.S. dollar cost of our operations in Israel. If the U.S. dollar declines in value in relation to the NIS, it will become more expensive for us to fund our operations in Israel. A revaluation of 1% of the NIS will affect our income before tax by less than 1%. The exchange rate of the U.S. dollar to the NIS, based on exchange rates published by the Bank of Israel, was as follows:

To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rate of the U.S. dollar against the NIS. These measures, however, may not adequately protect us from material adverse effects due to the impact of inflation in Israel.

Interest Rate Risk

Our exposure to market risk is confined to our cash and cash equivalents. We consider all short term, highly liquid investments, which include short-term deposits with original maturities of three months or less from the date of purchase, that are not restricted as to withdrawal or use and are readily convertible to known amounts of cash, to be cash equivalents. The primary objective of our investment activities is to preserve principal while maximizing the interest income we receive from our investments, without increasing risk. We invest any cash balances primarily in bank deposits and investment grade interest-bearing instruments. We are exposed to market risks resulting from changes in interest rates. We do not use derivative financial instruments to limit exposure to interest rate risk. Our interest gains may decline in the future as a result of changes in the financial markets.

Item 4T.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures or controls and other procedures that are designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, or Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that a company files or submits under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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We carried out an evaluation, under the supervision and with the participation of our Chief Executive and Chief Financial Officers, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of September 30, 2007. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that as of September 30, 2007, our disclosure controls and procedures were effective at providing reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.

Changes in Internal Controls over Financial Reporting

During the third quarter of fiscal year 2007, ending on September 30, 2007, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1.    Legal Proceedings

We are not involved in any material legal proceedings.

Item 1A.    Risk Factors

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2006.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

There have been no unregistered sales of equity securities during the quarter ended September 30, 2007 other than the issuance of 20,137 shares of common stock, in the aggregate, on September 12, 2007 to two of our former employees in connection with the exercise of outstanding stock options granted under our 2006 Stock Incentive Plan for aggregate proceeds equal to $3,648. The shares were issued pursuant to exemptions from registration under Section 4(2) of the Securities Act of 1933.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Submission of Matters to a Vote of Security Holders

None.

Item 5.    Other Information

None.

Item 6.    Exhibits

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†	Portions of this exhibit were omitted and have been filed separately with the Secretary of the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment under Rule 24b-2 of the Exchange Act.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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Exhibit 10.1

Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions, marked by [***], have been separately filed with the Securities and Exchange Commission.

RESEARCH AND LICENSE AGREEMENT

Made in Jerusalem this 8th day of August 2007, by and between:

YISSUM RESEARCH DEVELOPMENT COMPANY OF THE HEBREW UNIVERSITY OF JERUSALEM, of Hi Tech Park, Edmond J. Safra Campus, Givat Ram, Jerusalem 91390, Israel (“Yissum”), and THE BOYCE THOMPSON INSTITUTE, of Tower Road, Ithaca, NY 14850 (“BTI”) (collectively, the “Licensors”) of the one part; and

PROTALIX LTD., of 2 Snunit Street, Science Park, Carmiel 21000 Israel; (the “Company”), of the second part;

 

NOW THEREFORE THE PARTIES DO HEREBY AGREE AS FOLLOWS:

 

 

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disclose and grant rights therein to the Company as contemplated herein.

 

 

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after deduction of: (i) all trade, quantity, or cash discounts and credits by reason of rejection, return, price adjustment, rebates, recalls and unaffiliated third party agents’ commissions; (ii) commercially reasonable quantities of samples used for promotional purposes, clinical trials purposes and/or compassion clinical experiments; (iii) sales taxes (including VAT, customs, duties or other governmental charges levied on the production, sale, transportation, import or export, delivery or use of a Product (but specifically excluding income tax); (iv) insurance and transportation expenses paid by such party; and (v) Third Party Royalties; provided that such deductions shall be directly related to the sale of Products in the course of business of the Company, Affiliate or Sublicensee, all as determined from the books and records of the Company, its Affiliate or Sublicensee, maintained in accordance with generally accepted accounting principles consistently applied. For the sake of clarity, any payment or rebate received by the Company, Affiliate or Sublicensee from any governmental agency directly in relation to sales of Products shall be considered as Net Sales.

In the event of sales or deductions not made at “arms length”, then for the purpose of calculation of Royalties (as defined below) to the Licensors, Net Sales shall be calculated in accordance with arms length prices for sale of Products to end users and arm’s length deductions, to be determined by the current market conditions, or in the absence of such conditions, according to the assessment of a independent appraiser to be selected by the parties.

Net Sales shall be furthermore adjusted in the event that a Product is sold as part of a Combination Product as set forth in section 7.1 hereto.

 

 

 

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entered into by Yissum prior to having received the Company’s written notice of termination.

 

 

 

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receives requests for the Licensed Technology from researchers at academic and/or not-for-profit research organizations for use in non-commercial research, Yissum will forward the requests to the Company and the Company, and the Company, in consultation with the Researcher, will determine whether it is willing to supply Licensed Technology for such purpose. Any such disclosure or other supply of Licensed Technology shall be made pursuant to the Company’s standard form confidentiality or material transfer agreement (as the case may be) and will acknowledge Yissum’s contribution.

 

 

 

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respect of the exercise of the License. The periodic reports shall include a summary of the development results and any other related work effected by the Company or by any Affiliate or Sub-Licensee during the six month period prior to the report (“Development Reports”). Development Reports shall also set forth a non-binding general assessment regarding the projected completion date of the development of a Product and shall detail all changes to the Development Plan as well as the actual completion date of the development of a Product.

 

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of this Agreement by the Company had it been an act or omission of the Company, and which the Company has not made best efforts to promptly cure, including termination of the Sublicense, shall constitute a breach of this Agreement by the Company.

In consideration for the grant of the License, the Company shall pay the Licensors the following considerations:

 

On a country-by-country basis, in the event a third party commercializes either a competing product that does not infringe a Licensed Patent or an authorized generic, the applicable Royalty rate will be reduced by a percentage equal to [***], but in no event shall the Royalty payable to the Licensors be less than [***] of the Royalty rates set forth above. A competing product’s market share will be based on the share of the total market for products acting through the same mechanism as a Product based on data provided by IMS International or such other data mutually agreed by the Company and the Licensors.

In the event that any Product is sold in form of a Combination Product, the proportion of such Combination Product to be attributed to the Product and therefore subject to the Royalties shall be calculated based on [***].

Thus, provided that both the Product and the other constituent of the Combination Product are each sold on a stand-alone basis at the time in question, the proportion shall be as follows: [***], where A is the Net

 

 

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Sales price, of the Product sold separately, and B is the Net Sales price, of the other component sold separately.

In the event that the Product and the other constituent of the Combination Product are not each sold on a stand-alone basis at the time in question, the fraction above shall be calculated where A is the reasonably estimated commercial value of the Product sold separately and B is the reasonably estimated commercial value of the other component sold separately. Any such estimates shall be determined using criteria to be mutually agreed upon by the parties.

Net Sales from such Combination Product for the purposes of determining Royalties thereon shall be determined by multiplying the actual Net Sales of such Combination Product by such proportion, and the Company shall make payments of Royalties to the Licensors accordingly.

Notwithstanding any of the foregoing, if the use or sale of Product(s) by the Company, its Affiliate or Sublicensees in the country in which Product(s) are sold or used is not covered by a Valid Claim in such country, the Royalties payable with respect to Net Sales in such country shall be [***] of the amounts otherwise set forth above. For the avoidance of doubt, a Product will not be deemed to be covered by a Valid Claim if there is only a patent application pending but not yet issued. In the event that such an application is granted during the Royalty Term, the Company shall pay Yissum the full Royalty on all Net Sales from the date the application was filed.

 

 

 

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forth in sub-section (i) or (ii), above, have occurred, Periodic Reports shall be provided to the Licensors whether or not Royalties and Sublicense Fees are payable for a particular calendar quarter. The Periodic Reports shall contain full particulars of all sales made by the Company, Affiliates or Sublicensees and of all Sublicense Consideration received, including a breakdown of the number and type of Products sold, discounts, returns, the country and currency in which the sales were made, invoice dates and all other data enabling the Royalties and Sublicense Fees payable to be calculated accurately.

Bank Name: Hapoalim ( 12 )

Branch Name: Zion Square ( 783 )

Account Number: [***]

Swift Code: Poalilit

Yissum shall be responsible for remitting the appropriate amount of the Company’s payments to BTI in accordance with the agreement between Yissum and BTI.

 

 

 

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Sublicense Fees previously paid on account Net Sales that were recorded as bad debts in the Company’s annual audited financial statements. In the event that such bad debts are recorded by the Company in its annual audited financial statement after the Company’s obligation to pay Royalties and/or Sublicense Fees has ceased, the Licensors shall repay any Royalties or Sublicense Fees received on account of Net Sales that were reported as bad debts by the Company.

The Company shall, and shall require and cause its Affiliates and Sublicensees to, retain the such books of account for five (5) years after the end of each calendar year during the period of this Agreement, and, if this Agreement is terminated for any reason whatsoever, for five (5) years after the end of the calendar year in which such termination becomes effective.

 

 

 

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withdrawals on a credit line at Bank Leumi Le-Israel Ltd. on the currency of payment.

All rights in the Background Technology, the Development Technology and the Foreground Technology shall be solely owned, as between the Licensors and the Company by the Licensors, and the Company shall hold and make use of the rights granted pursuant to the License solely in accordance with the terms of this Agreement.

[***];

[***];

provided that at the time of payment, this Agreement has not been terminated. Notwithstanding the foregoing, [***] shall begin to pay [***] costs associated with the Licensed Patents listed in part one of Appendix A upon the earlier of (i) [***] from the execution of this Agreement; or (ii) the date the [***]. On such date, [***] will pay [***] documented costs and expenses incurred as from the date hereof and to that date (the “Triggering Date”) in connection with the prosecution and maintenance of the Licensed Patents listed in part one of Appendix A and shall thereafter pay the [***] as well. For the avoidance of doubt, it is hereby agreed that should the Company exercise its right pursuant to section 10.8 below in respect to any of the Licensed Patents listed in part one of Appendix A on or before the Triggering Date, then the

 

 

 

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Company shall not be liable to pay such previous or future patent costs in respect thereto to the Licensors.

 

 

 

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legend “patent pending”) in accordance with the statutory requirements in the country or countries of manufacture, use and sale. The Company shall ensure that its Sublicensees comply with the provisions of this section.

 

 

 

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12.1.1 information which at the time of disclosure by one party to the other is in the public domain;

12.1.2. information which after disclosure by one party to the other becomes part of the public domain by publication except by breach of this Agreement;

12.1.3 information which the receiving party can establish by competent proof was already in its possession at the time of its receipt and was not acquired directly or indirectly from the other party; and

12.1.4 information received from third parties who were lawfully entitled to disclose such information.

 

 

 

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of the Research or any matter relating to the Licensed Technology, without obtaining the prior written consent of the Licensors.

 

 

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The minimum amounts of insurance coverage required above shall not be construed to create a limit of the Company’s liability with respect to its indemnification obligations under this section 14.

 

 

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right to terminate this Agreement effective at the end of such fifteen (15) day period without notice or any additional waiting periods.

 

 

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In the event that the Development Results transferred and assigned to Licensors as set forth in this 15.6 shall be licensed to a third party and shall

 

 

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generate License Fees or Royalties or Sublicense Fees to the Licensors, then subject to the Company having complied and continuing to comply with all its obligations under this Agreement which remain in existence following termination of the License as aforesaid, the Licensors shall pay to the Company [***] of the Net Proceeds (as defined below) actually received by the Licensors in respect of such license to third party, until such time as the Company shall have received, in aggregate, the full amount of the documented capital investment actually expended out-of-pocket by the Company in order to generate the Development Technology, less any amounts received or receivable by the Company from third parties in connection with the Licensed Technology prior to the transfer and assignment of the Development Technology to the Licensors, as certified by external independent auditors agreed upon by the Parties (the “Development Reimbursement”). Notwithstanding the foregoing, the Licensors shall be entitled to deduct from the Development Reimbursement any amount that they are required to pay as a result of the Grant Transfer Conditions. The Company will either (i) allow the Licensors a credit against Development Reimbursements to be paid in the future of any Development Reimbursements previously paid on account of Net Proceeds that were reported as bad debts in the Licensors’ annual audited financial statements or, (ii) if there are no future Development Reimbursements to be made by the Licensors, return the amount of Development Reimbursements paid to the Company on account of Net Proceeds that were reported as bad debts in the Licensors’ annual audited financial statements. The Licensors shall pay to the Company amounts, if any, payable under this section 15.6, within ninety (90) days of receipt of the relevant Net Proceeds.

For the purpose of this section, “Net Proceeds” means royalties or license fees actually received by the Licensors in respect of such license with a third party (excluding funds for research or development or payments for the supply of services) after deduction of all costs, fees and expenses incurred by the Licensors in connection with such license (including, without limitation, patent costs, and all attorneys fees and expenses and other costs and expenses in connection with the negotiation and conclusion of such license).

The Company shall have the rights granted to the Licensors pursuant to section 8, mutatis mutandis, in respect of the Net Proceeds.

For the avoidance of doubt, this provision shall not be of any force or effect following the expiration of the Royalty Term, provided that the Company had not committed an uncured breach of the Agreement prior to the expiration of the Royalty Term.

 

 

 

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Company from its obligation to carry out any financial or other obligation which it was liable to perform prior to the Agreement’s termination.

In addition, sections 7, 8, 12, 14, 15, 16, 17 and 19 shall survive the termination of this Agreement to the extent required to effectuate the intent of the parties as reflected in this Agreement.

The provisions of this Agreement and everything concerning the relationship between the parties in accordance with this Agreement shall be governed by Israeli law and jurisdiction shall be granted only to the appropriate court in Jerusalem.

 

 

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independent contractors and there neither is nor shall there be any employer-employee or principal-agent relationship or partnership relationship between the Company (or any of its employees) and the Licensors. Each party will be responsible for payment of all salaries and taxes and social welfare benefits and any other payments of any kind in respect of its employees and officers, regardless of the location of the performance of their duties, or the source of the directions for the performance thereof.

 

 

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herself shall cease to apply, as of such time that she may leave the employ of the University.

All notices and communications pursuant to this Agreement shall be made in writing and sent by facsimile or by registered mail or served personally at the following addresses:

Yissum Research Development Company

of the Hebrew University of Jerusalem,

P.O. Box 39135,

Jerusalem 91390

Israel

Facsimile: +972-2-658-6669

Boyce Thompson Institute

Tower Road

Ithaca, NY 14850

United States of America

Facsimile: +1-_____________

 

Protalix Ltd.

2 Snunit Street

Science Park

Carmiel 21000

 

 

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Israel

Facsimile: +972- (0) 4-9889489

With a copy (which shall not constitute notice) to:

Baratz, Horn & Co.

1 Azrieli Center, Round Tower,

18^th Floor

Tel-Aviv 67021, Israel

Attention: Adv. Yael Baratz

Facsimile: 03-6960986

or such other address furnished in writing by one party to the other. Any notice served personally shall be deemed to have been received on the day of service, any notice sent by registered mail as aforesaid shall be deemed to have been received seven days after being posted by prepaid registered mail. Any notice sent by facsimile shall be deemed to have been received by the next business day after receipt of confirmation of transmission.

 

 

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IN WITNESS THE HANDS OF THE PARTIES

 

 

 

 

I the undersigned, Prof. Hermona Soreq have reviewed and am familiar with and agree to all of the above terms and conditions. I hereby undertake to cooperate fully with the Licensors in order to ensure its ability to fulfill their obligations hereunder, as set forth herein. I further undertake to refrain from any act or omission that may constitute a breach hereunder.

 

 

 

 

 

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Appendix A

Licensed Patents

Part One

Part Two

[***]

[***]

Portions of this exhibit were omitted and filed separately with the Secretary of the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment under Rule 24b-2 of the Exchange Act.

 

 

 

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Appendix B

The Development Plan

[To be provided by the Company.]

 

 

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EXHIBIT 31.1

CERTIFICATION

I, David Aviezer, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Protalix BioTherapeutics, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2007

/s/ David Aviezer                                        
David Aviezer, Ph.D.
President and Chief Executive Officer

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EXHIBIT 31.2

CERTIFICATION

I, Yossi Maimon, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Protalix BioTherapeutics, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2007

/s/ Yossi Maimon                                        
Yossi Maimon
Chief Financial Officer, Treasurer

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EXHIBIT 32.1

PROTALIX BIOTHERAPEUTICS, INC.

CERTIFICATION

In connection with the quarterly report of Protalix BioTherapeutics, Inc. (the ‘‘Company’’) on Form 10-Q for the period ended September 30, 2007 as filed with the Securities and Exchange Commission (the ‘‘Report’’), I, David Aviezer, President and Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

	(1)	the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

	(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, ‘‘filed’’ with the Securities and Exchange Commission.

Date: November 14, 2007

/s/ David Aviezer                                        
David Aviezer, Ph.D.
President and Chief Executive Officer

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EXHIBIT 32.2

PROTALIX BIOTHERAPEUTICS, INC.

CERTIFICATION

In connection with the quarterly report of Protalix BioTherapeutics, Inc. (the ‘‘Company’’) on Form 10-Q for the period ended September 30, 2007 as filed with the Securities and Exchange Commission (the ‘‘Report’’), I, Yossi Maimon, Vice President and Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for the purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

	(1)	the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

	(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, ‘‘filed’’ with the Securities and Exchange Commission.

Date: November 14, 2007

/s/ Yossi Maimon                                               
Yossi Maimon
Vice President and Chief Financial Officer

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