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<SEC-DOCUMENT>0000950123-08-007804.txt : 20090506
<SEC-HEADER>0000950123-08-007804.hdr.sgml : 20090506
<ACCEPTANCE-DATETIME>20080711142235
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000950123-08-007804
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20080711

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			Protalix BioTherapeutics, Inc.
		CENTRAL INDEX KEY:			0001006281
		STANDARD INDUSTRIAL CLASSIFICATION:	BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836]
		IRS NUMBER:				650643773
		STATE OF INCORPORATION:			FL
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		2 SNUNIT ST
		STREET 2:		SCIENCE PARK, POB 455
		CITY:			CARMIEL
		STATE:			L3
		ZIP:			20100
		BUSINESS PHONE:		972-4-988-9488

	MAIL ADDRESS:	
		STREET 1:		2 SNUNIT ST
		STREET 2:		SCIENCE PARK, POB 455
		CITY:			CARMIEL
		STATE:			L3
		ZIP:			20100

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ORTHODONTIX INC
		DATE OF NAME CHANGE:	19980422

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	EMBASSY ACQUISITION CORP
		DATE OF NAME CHANGE:	19960124
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
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</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1290 AVENUE OF THE AMERICAS<BR>
NEW YORK, NY 10104-0050<BR><BR>
TELEPHONE: 212.468.8000<BR>
FACSIMILE: 212.468.7900<BR><BR>
WWW.MOFO.COM
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-variant: SMALL-CAPS">morrison &#038; foerster llp</FONT><BR><BR>
<FONT style="font-variant: SMALL-CAPS">new york, san francisco, </FONT><BR>
<FONT style="font-variant: SMALL-CAPS">los angeles, palo alto, </FONT><BR>
<FONT style="font-variant: SMALL-CAPS">san diego, washington, d.c.</FONT><BR><BR>
<FONT style="font-variant: SMALL-CAPS">northern virginia, </FONT><BR>
<FONT style="font-variant: SMALL-CAPS">orange county, denver,</FONT><BR>
<FONT style="font-variant: SMALL-CAPS">sacramento, walnut creek</FONT><BR><BR>
<FONT style="font-variant: SMALL-CAPS">tokyo, london, beijing, </FONT><BR>
<FONT style="font-variant: SMALL-CAPS">shanghai, hong kong, </FONT><BR>
<FONT style="font-variant: SMALL-CAPS">singapore, brussels</FONT><BR></TD>
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">July&nbsp;11, 2008
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Writer&#146;s Direct Contact</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;212.468.8163</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">JTanenbaum@mofo.com</TD>
</TR>
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</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ms.&nbsp;Vanessa Robertson<BR>
Staff Accountant<BR>
Division of Corporation Finance<BR>
United States Securities and Exchange Commission<BR>
100 F. Street, N.E.<BR>
Washington, D.C. 20549

</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">RE:</TD>
    <TD>&nbsp;</TD>
    <TD>Protalix BioTherapeutics, Inc.<BR>
Annual Report on Form&nbsp;10-K, filed March&nbsp;17, 2008<BR>
for the Fiscal Year Ended December&nbsp;31, 2007<BR>
File No.&nbsp;001-33357</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ladies and Gentlemen:

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On behalf of our client, Protalix BioTherapeutics, Inc., a Florida corporation (the
&#147;Company&#148;), transmitted herewith are responses to the Staff&#146;s comments to the Company&#146;s Annual
Report on Form 10-K for the fiscal year ended December&nbsp;31, 2007 (the &#147;Form 10-K&#148;), which comments
were set forth in the Staff&#146;s letter to the Company dated June&nbsp;26, 2008 (the &#147;Comment Letter&#148;) to
Yossi Maimon, the Company&#146;s Chief Financial Officer and Treasurer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For ease of reference, we have noted the Staff&#146;s comments in bold faced type and the responses
in regular type.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations </B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Results of Operations, page 58</B></U><BR>
<U><B>Research and Development Expenses</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>1.</b></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>We believe that your disclosures about historical research and development expenses and
estimated future expenses related to your major research and development projects could be
enhanced for investors. Please refer to the Division of Corporation Finance &#147;Current
issues and Rulemaking Projects Quarterly Update&#148; under section VIII &#150; Industry Specific
Issues &#150; Accounting and Disclosure by Companies Engaged in Research and Development
Activities.
You can find it at the following website address:
<U><B>http://www.sec.gov/divisions</B></U></b></TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
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</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>/corpfin/cfcrq032001.htm</B></U><B>. Please revise your MD&#038;A to disclose the following information
for each of your major research and development projects.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>a.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The current status of the project;</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>b.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The costs incurred during each period presented and to date on
each project;</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>c.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The nature, timing and estimated costs of the efforts necessary
to complete each project;</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>d.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The anticipated completion dates of each project;</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>e.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The risks and uncertainties associated with completing
development on schedule, and the consequences to operations, financial position
and liquidity if each project is not completed timely; and finally</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>f.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>The period in which material net cash inflows from significant
projects are expected to commence for each project.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Regarding b., if you do not maintain any research and development costs by project, disclose
that fact and explain why management does not maintain and evaluate research and development
costs by project. Provide other quantitative or qualitative disclosure that indicates the
amount of the company&#146;s resources being used on the project.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Regarding c. and d., disclose the amount or range of estimated costs and timing to complete
the phase in process and each future phase. To the extent that information is not
estimable, disclose those facts and circumstances indicating the uncertainties that preclude
you from making a reasonable estimate.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Response: </B>The majority of the Company&#146;s research and development expenses are currently
incurred in connection with the phase III clinical trial of the Company&#146;s lead product
candidate, prGCD for the treatment of Gaucher disease. As disclosed in the Form&nbsp;10-K, the
Company is also engaged in the research and development of three other projects, each of
which is in the research stage. When compared to the expenditures for the research and
development of prGCD, the Company believes that the expenditures for the other research and
development projects are immaterial to the business and prospects of the Company. For such
reasons, the Company does not record and maintain research and development costs on a per
project basis. In addition, due to the inherently unpredictable nature of the preclinical
and clinical development process, the Company is not able to estimate the future costs of
any of its research and development projects with any certainty, nor is the Company able to
predict the timing or receipt of net cash inflows for any project, if any. Based upon the
foregoing, the Company believes that it has disclosed the appropriate information regarding
its research and development expenses in the Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations (the &#147;MD&#038;A&#148;) section of the 10-K.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based upon the Staff&#146;s comment, the Company intends to structure the Research and
Development Expense subsection in the MD&#038;A
</TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
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    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>section of future annual reports in a manner similar to model disclosure set forth on
<U>Exhibit&nbsp;A</U>.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Report of Independent Registered Public Accounting Firm, page F-2</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Auditor association with the cumulative data is required on an annual basis as long as the
registrant is in the development stage. There is no reference to the cumulative data in the
accountant&#146;s report. In addition, it does not appear as though a waiver for this requirement
was granted by the Office of the Chief Accountant within the Division of Corporation Finance.
Please advise whether a waiver was obtained and provide us a copy or include the appropriate
accountant report. To be granted a waiver it must be impracticable for you to obtain an audit
opinion on the cumulative data. A written submission explaining why it is impracticable must
be provided to the Office of the Chief Accountant within the Division of Corporation Finance
to obtain a waiver.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RESPONSE</B>: The omission of the reference to the cumulative data in the Report of the
Independent Registered Accounting Firm included in the Company&#146;s Financial Statements for
the fiscal year ended December&nbsp;31, 2007 is due to a typographical error. The Company&#146;s
accountants provided an opinion on the cumulative data in their report for the 2006
financial statements and intended to include the cumulative data in the 2007 integrated
audit opinion. A copy of the corrected Report of the Independent Registered Accounting Firm
included in the Company&#146;s Financial Statements for the fiscal year ended December&nbsp;31, 2007
is attached hereto as <U>Exhibit&nbsp;B</U>.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Note 4 &#151; Commitments, page F-18</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Please revise your disclosure to include all of the milestone payments you will be required
to pay under certain research and license agreements. Please include the events that would
trigger these payments. Also tell us why you did not include these amounts in your
contractual obligation table. Finally, please include the length of and the termination
provisions for all of your material agreements.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RESPONSE: </B>As discussed with the Staff, most of the payments under the Company&#146;s research and
license agreements are in the form of royalties on the net sales of an approved product, if
any. There are few provisions in such agreements which obligate the Company or its
wholly-owned subsidiary, Protalix Ltd., to make milestone payments or other similar payments
other than the royalties. The Company believes that the amounts of these payments,
individually and in the aggregate, are immaterial to the business and prospects of the
Company due to the relatively small amounts of the payments, the contingent nature of the
payments, the fact that certain of the payments are payable in the future and the fact that
certain of the payments are creditable against future royalty payments.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For the foregoing reasons, the Company does not believe that additional disclosure regarding
the milestone payments and other payments is necessary for the protection of
</TD>
</TR>
</TABLE>
</DIV>
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>investors. Such payments, if all of the contingencies are met, amount to approximately $1.3
million and would be payable, if at all, as the Company&#146;s projects progress over the course
of a number of years. In addition, the Commission has previously granted confidential
treatment for the amount and timing of all such payments. For the same reasons, the Company
did not include any of the payments in the contractual obligation table set forth in the
MD&#038;A section of the Form 10-K.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based upon the Staff&#146;s comments, the Company intends to include disclosure regarding the
aggregate amount of the milestone and other payments in the financial statements it prepares
in future annual reports. Also, to the extent applicable, the Company intends to include
disclosure regarding the length of and termination provisions of its research and license
agreements in the financial statements it prepares in future annual reports.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Please explain how the $1,724,000 commitment under your sub-contracting agreements relates to
the purchase obligations of $4,086,000 included in your contractual obligations table.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RESPONSE: </B>The purchase obligations of approximately $4,086,000 disclosed in the contractual
obligation table in the MD&#038;A of the Form 10-K includes the Company&#146;s commitments of
approximately $1,724,000, as of December&nbsp;31, 2007, under certain of the Company&#146;s research
and development agreements as disclosed in Note 4 of the Company&#146;s Financial Statements for
the fiscal year ended December&nbsp;31, 2007. The remaining approximately $2,362,000 disclosed
in the contractual obligation table represents open purchase orders which the Company had
issued to certain suppliers and other vendors that were outstanding as of December&nbsp;31, 2007.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Note 5&#151;Share Capital, page F-20</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>5.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Please provide us a chronology of facts, circumstances and events explaining the change in
fair value of the common stock issued during 2006 of approximately $1.50 per share to the
trading value immediately after the merger of approximately $27 per share.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RESPONSE: </B>As discussed in Note 5(b) of the Company&#146;s Financial Statements for the fiscal
year ended December&nbsp;31, 2007, the description of share capital in the Company&#146;s historical
financial statements reflects the historical financial statements of Protalix Ltd., and have
been retroactively restated to reflect the implicit conversion ratio related to the exchange
of ordinary shares of Protalix Ltd. for shares of the Company&#146;s common stock, par value
$.001 per share (the &#147;Common Stock&#148;), in connection with the merger of the Company with a
wholly-owned subsidiary of the Company, which was consummated on December&nbsp;31, 2006 (the
&#147;Merger&#148;). In August&nbsp;2006, Protalix Ltd. sold 163,774 of its ordinary shares to investors
for aggregate proceeds equal to $15,000,000 or $91.59 per ordinary share. On the same date,
Protalix Ltd. entered into a merger agreement with the Company and a wholly-owned subsidiary
of the Company. After giving retroactive effect to the conversion ratio in the Merger,
which was approximately 1 for 61.08, the offering was conducted at approximately $1.50 per
share (after giving effect to the 10-
</TD>
</TR>
</TABLE>
</DIV>
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</TABLE>
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</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>for-1 reverse stock split which went into effect on December&nbsp;29, 2006, as discussed below
(the &#147;Reverse Stock Split&#148;)).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On August&nbsp;21, 2006, the closing price of the Common Stock quoted on the OTC Bulletin
Board<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP>(the &#147;OTCBB&#148;) was $3.90 per share (which is a pre-Reverse Stock Split
number). From August&nbsp;22, 2006 through December&nbsp;29, 2006, the closing price of the Common
Stock declined to $1.67 per share (which is a pre-Reverse Stock Split number) with very low
volume. On many days during such period, there was no trading in the Common Stock at all.
In connection with the closing of the Merger, the Company completed a 10-for-1 reverse stock
split on December&nbsp;29, 2006. Accordingly, on January&nbsp;3, 2007, the first trading day after
the effective date of the Reverse Stock Split and the closing of the Merger, the opening
price of the Common Stock, as quoted on the OTCBB, was $14.00 per share. The closing price
of the Common Stock on that date was $27 per share. All of the corporate events discussed
in this response have been disclosed by the Company in either the Form&nbsp;10-K or in other
filings made with the Commission. All of the Company&#146;s officers and directors entered into
lock-up agreements in connection with the Merger and were restricted from selling more than
10% of their holdings in the Company. To the Company&#146;s knowledge, none of the Company&#146;s
officers or directors sold any shares of Common Stock during fiscal year 2007.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>6.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>You state in Note 5 and on pages 56-57 that you used various methods to determine the fair
value of your common stock. It appears as though your stock was trading prior to the March
12, 2007 date that it was listed on the American Stock Exchange. In addition, it appears you
used the $5 per share offering price in October&nbsp;2007 to value equity issuances granted before
that including for issuances during the third quarter ended September&nbsp;30, 2007 even though
there was a trading price of your stock during that period. Please tell us how your use of
valuation methods during the first and third quarters of 2007 rather than the trading price of
your stock to value equity issuances for compensation expense/consulting expense, etc.
complies with FAS 123R.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RESPONSE: </B>Prior to March&nbsp;12, 2007, the Common Stock was quoted on the OTCBB. On March&nbsp;12,
2007, the Common Stock was accepted for listing on the American Stock Exchange (the &#147;AMEX&#148;).
During the quarter ended March&nbsp;31, 2007 (the &#147;First Quarter&#148;), more than 99% of the
outstanding shares of Common Stock were restricted or otherwise subject to contractual
lock-up agreements, and were not available for sale in the public market, the number of
trades in the public market were infrequent and the average daily volume was very low. The
average daily trading volume of the Common Stock during the First Quarter was 983 shares,
with a value of approximately $22,000 (representing approximately 0.001% of the Company&#146;s
market capitalization at the time). There were 22&nbsp;days during the First Quarter in which
there were no trades of the Common Stock at all. During the First Quarter, the closing
price of the Common Stock ranged from $15.75 to $31.32, reflecting market capitalizations
well in excess of the valuation of Protalix Ltd. prior to the Merger. The Company does not
believe that there was any business or clinical development justifying the increase in its
valuation. In preparing its quarterly financial statements for the First Quarter, the
Company determined
</TD>
</TR>
</TABLE>
</DIV>
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</TABLE>
</DIV>

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</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>that it was not appropriate to use the quoted price of the Common Stock to establish the
fair value of the options granted to the Company&#146;s consultants and non-employees because the
prices quoted did not reflect an active market for the Common Stock. In lieu of the prices
quoted on the OTCBB, and later reported by the AMEX, the fair value was established by the
Company&#146;s management in good faith, based on a retrospective valuation of the fair value of
the Common Stock at the end of the First Quarter and in consultation with a third-party
specialist. The Company decided that too much time had passed since the last financing by
Protalix Ltd. in August&nbsp;2006 for the Company to use the valuation to calculate fair value.
Rather, the Company based its valuation on the valuation of Bio-Cell Ltd., an Israeli public
company traded on the Tel-Aviv Stock Exchange (&#147;Bio-Cell&#148;). As of March&nbsp;31, 2007, Bio-Cell
held approximately 20% of the outstanding shares of the Company&#146;s Common Stock and did not
have any other significant assets other than its interest in the Company. The Company&#146;s
management took the position that there was an active market in Bio-Cell&#146;s shares as the
average daily trading volume of Bio-Cell&#146;s shares on the Tel-Aviv Stock Exchange was 46,807
shares, with a value of approximately $500,000 (representing approximately 0.8% of
Bio-Cell&#146;s market capitalization at the time). Based on the above, the fair value of the
Common Stock underlying the options granted to consultants and non-employees established by
the Company was $6.19 per share as of the end of the First Quarter (reflecting an aggregate
market value of the Company of approximately $460&nbsp;million).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Common Stock of the Company was listed for trading on the AMEX for the entire quarter
ended June&nbsp;30, 2007 (the &#147;Second Quarter&#148;). The trading volume of the Common Stock during
the Second Quarter was well in excess of the volume for the First Quarter with an average
daily trading volume of 35,356 shares a day and with a value of approximately $1&nbsp;million.
With an active market available to determine the fair value of the Common Stock, the Company
used the prices reported by the AMEX to determine the fair value of the Common Stock
underlying the outstanding options and shares of restricted common stock held by employees
and non-employees.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>During the quarter ended September&nbsp;30, 2007 (the &#147;Third Quarter&#148;), the Common Stock traded
at relatively higher volumes, with an average daily volume of 103,225 shares of Common
Stock, at approximately $3&nbsp;million. However, more than 99% of the outstanding shares of
Common Stock were still subject to trading restrictions. During the Third Quarter, the
Common Stock continued to trade at price levels that reflected a market capitalization far
in excess of the valuation of Protalix Ltd. prior to the Merger. During the second quarter,
the Company achieved certain milestones, such as approval from the United States Food and
Drug Administration to commence a phase III clinical trial of prGCD during the Third
Quarter. However, the Company did not believe that the market capitalization reflected the
fair value of the Company. On October&nbsp;25, 2007, the Company completed an underwritten
public offering of 10,000,000 shares of Common Stock in an underwritten public offering at a
price equal to $5.00 per share. The offering was underwritten by UBS Securities LLC and
CIBC World Markets Corp. (now Oppenheimer).</TD>
</TR>

</TABLE>
</DIV>


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</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In preparing its quarterly financial statements for the Third Quarter, the Company&#146;s
management determined that the price per share established in the underwritten offering was
more reflective of the fair value of the Common Stock than the trading prices of the Common
Stock reported by the AMEX. Accordingly, the Company&#146;s management used $5.00 per share as
the fair value of the Common Stock underlying the outstanding options and shares of
restricted common stock held by non-employees that vested during the Third Quarter.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">For purposes of determining the fair value of the Common Stock underlying the outstanding
options and shares of restricted common stock held by non-employees that vested after the
Third Quarter, management has used the closing sale price of the Common Stock reported by
the AMEX. The closing price of the Common Stock on December&nbsp;31, 2007 was $3.40 per share.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">FAS 123R principally requires the use of the &#147;fair-value-based method&#148; for measuring the
value of stock-based compensation. Generally, the reported market prices of securities that
are traded on a national securities exchange or the Nasdaq are the most reliable measure of
the fair value of such securities. Accordingly, a company that is traded on a national
stock exchange will fix the value of its common stock, or options to acquire shares of its
common stock, based on the prices reported by the applicable exchange, typically the closing
price of the common stock on the valuation date. However, the prices reported by the
exchanges are not the exclusive determinant of the fair value of a security. In certain
situations, the fair value of common stock is not readily determinable by reference to the
prices reported by the applicable exchange, or Nasdaq. As discussed herein, the Company&#146;s
management determined that, for purposes of the First Quarter and the Third Quarter, it was
not appropriate to base the fair value of the Common Stock underlying the outstanding
options and shares of restricted common stock held by non-employees on the last sales price
of the Common Stock on the applicable valuation date, as reported by the AMEX. For the
reasons set forth herein, the Company&#146;s decision complied with FAS 123R.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">* * *
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please note that the Company has authorized us to inform you that it acknowledges that the
Company is responsible for the adequacy and accuracy of the disclosure in the filing; that Staff
comments or changes to disclosure in response to Staff comments do not foreclose the Commission
from taking any action with respect to the filing; and that the Company may not assert Staff
comments as a defense in any proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><IMG src="y63008y6300801.gif" alt="(MORRISON LOGO)">
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please call the undersigned at the telephone number set forth above or Joseph Magnas at
212 &#183;336 &#183;4170 with any question or comment you may have regarding the responses set forth herein.
In addition, please send all written correspondence directly to the undersigned and Joseph Magnas
of Morrison &#038; Foerster LLP, 1290 Avenue of the Americas, New York, New York 10104, telecopy (212)
468-7900, with copies to David Aviezer, Ph.D., the Company&#146;s President and Chief Executive Officer,
at 2 Snunit Street, Science Park, P.O.B. 455, Carmiel 20100, Israel, telecopy &#043;972-4-988-9489.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Sincerely,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">/s/ James R. Tanenbaum
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">cc: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; David Aviezer, Ph.D.<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Yossi Maimon

</DIV>


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<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><U><B>Exhibit&nbsp;A</B></U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>Research and Development Expense Model Disclosure</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Research and Development Expense</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We expect our research and development expense to increase as we continue to develop our product
candidates. Research and development expense consists of:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>internal costs associated with research and development activities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>payments made to third party contract research organizations, contract manufacturers,
investigative sites and consultants;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>manufacturing development costs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>personnel-related expenses, including salaries, benefits, travel, and related costs for
the personnel involved in research and development;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>activities relating to the advancement of product candidates through preclinical studies
and clinical trials; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>facilities and other allocated expenses, which include direct and allocated expenses for
rent and maintenance of facilities, as well as laboratory and other supplies.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table identifies our current major research and development projects:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="75%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Project</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Status</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Expected Near Term Milestone</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">prGCD for the treatment of Gaucher disease
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Phase III
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">TBD</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">PRX 102 &#151; alpha Galactosidase enzyme
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Research
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">TBD</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Acetylcholinesterase
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Research
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">TBD</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">PRX 111 &#151; Follicle Stimulating Hormone (FSH)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Research
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">TBD</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All of our projects, other than our phase III clinical trial of prGCD, are in the research phase
with relatively immaterial costs. Most of our research and development costs are incurred in
connection with our phase III clinical trial of prGCD. Our internal resources, employees and
infrastructure are not tied to any individual research project and are typically deployed across
all of our projects. We currently do not record and maintain research and development costs per
project.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The costs and expenses of our projects are partially funded by grants we have received from the
OCS. Each grant is deducted from the related research and development expenses as the costs are
incurred. For additional information regarding the grant process, see &#147;Business&#151;Israeli
Government Programs&#151;Encouragement of Industrial Research and Development Law, 1984&#148; in Item&nbsp;1 of
this Annual Report. There can be no assurance that we will continue to receive grants from the OCS
in amounts sufficient for our operations, if at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At this time, due to the inherently unpredictable nature of preclinical and clinical development
processes and given the early stage of our preclinical product development programs, we are unable
to estimate with any certainty the costs we will incur in the continued development of the product
candidates in our pipeline for potential commercialization. Clinical development timelines, the
probability of success and development costs can differ materially from expectations. While we are
currently focused on advancing each of our product development programs, our future research and
development expenses will depend on the clinical success of each product candidate, as well as
ongoing assessments of each product candidate&#146;s commercial potential. In addition, we cannot
forecast with any degree of certainty which product candidates may be subject to future
collaborations, when such arrangements will be secured, if at all, and to what degree such
arrangements would affect our development plans and capital requirements. See &#147;Risk Factors&#151;All
of our product candidates other than prGCD are in research stages. If we are unable to develop and
commercialize our other product candidates, our business will be adversely affected&#148; and &#147;&#151;We may
not obtain the necessary U.S. or worldwide regulatory approvals to commercialize our drug
candidates in a timely manner, if at all, which would have a material adverse effect on our
business and results of operations.&#148;
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We expect our research and development expenses to increase in the future as we continue the
advancement of our clinical trials and preclinical product development programs. The lengthy
process of completing clinical trials and seeking regulatory approval for our product candidates
requires expenditure of substantial resources. Any failure or delay in completing clinical trials,
or in obtaining regulatory approvals, could cause a delay in generating product revenue and cause
our research and development expense to increase and, in turn, have a material adverse effect on
our operations. If the phase III clinical trial or prGCD produces favorable results, we expect to
file a New Drug Application, an NDA, for prGCD with the FDA by the end of the first half of 2009.
Because of the factors set forth above, we are not able to estimate with any certainty when we
would recognize any net cash inflows from our projects. See &#147;Risk Factors&#151;Clinical trials are
very expensive, time-consuming and difficult to design and implement and may result in unforeseen
costs which may have a material adverse effect on our business and results of operations.&#148;
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><U><B>Exhibit&nbsp;B</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the shareholders of

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>PROTALIX BIOTHERAPEUTICS, INC.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>(A Development stage company)</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, the consolidated balance sheets and the related statements of operations, changes
in shareholders&#146; equity and cash flows present fairly, in all material respects, the financial
position of Protalix BioTherapeutics, Inc. and its subsidiary (a development stage enterprise) at
December&nbsp;31, 2007 and 2006, and the results of their operations and their cash flows for each of
the three years in the period ended December&nbsp;31, 2007 and for the period from December&nbsp;27, 1993
(date of Company&#146;s incorporation) through December&nbsp;31, 2007 in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of
December&nbsp;31, 2007, based on criteria established in Internal Control &#151; Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company&#146;s
management is responsible for these financial statements, for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying <B>&#147;</B><I>Management Report on Internal Control over
Financial Reporting</I><B>&#148; </B>appearing under Item&nbsp;9A. Our responsibility is to express opinions on these
financial statements, on the Company&#146;s internal control over financial reporting based on our
audits (which was an integrated audit in 2007). We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether effective internal control over
financial reporting was maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits
also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A company&#146;s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
company&#146;s internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii)&nbsp;provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (iii)&nbsp;provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company&#146;s assets that could have a material effect on the
financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As discussed in note 1L effective January&nbsp;1, 2006, the Company changed its method of accounting for
share-based payment to conform with FASB Statement of Financial Accounting Standards No.&nbsp;123
(revised 2004), &#147;Share-based Payment&#148;.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Tel-Aviv, Israel</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">March&nbsp;14, 2008
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Kesselman &#038; Kesselman</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Certified Public Accountant (Isr.)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">A member of PricewaterhouseCoopers</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">International Limited</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
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