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<SEC-DOCUMENT>0000950123-08-018260.txt : 20090506
<SEC-HEADER>0000950123-08-018260.hdr.sgml : 20090506
<ACCEPTANCE-DATETIME>20081223173916
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000950123-08-018260
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20081223

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
<TEXT>
<HTML>
<HEAD>
<TITLE>LETTER TO THE S.E.C.</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">

<P><DIV style="position: relative; float: left; width: 35%">

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="white-space: nowrap">1290
AVENUE OF THE AMERICAS</FONT><BR>
NEW YORK, NY 10104-0050<BR>&nbsp;<BR>
TELEPHONE:
212.468.8000<BR>
FACSIMILE: 212.468.7900<BR>
&nbsp;<BR>
WWW.MOFO.COM
</DIV>
</DIV>
<DIV style="position: relative; float: right; width: 25%">

<DIV align="left" style="font-size: 7pt; margin-top: 6pt">MORRISON &#038; FOERSTER LLP<BR>&nbsp;<BR>
NEW
YORK, SAN FRANCISCO,<BR>
LOS ANGELES, PALO ALTO,<BR>
SAN DIEGO, WASHINGTON, D.C.<BR>&nbsp;<BR>
NORTHERN
VIRGINIA, DENVER,<BR>
SACRAMENTO, WALNUT CREEK<BR>&nbsp;<BR>
TOKYO,
LONDON, BEIJING,<BR>
SHANGHAI, HONG KONG,<BR>
SINGAPORE, BRUSSELS
</DIV>
</DIV>
<BR clear="all"><BR>

<DIV align="right" style="font-size: 10pt; margin-top: 24pt">Writer&#146;s Direct Contact<BR>
212.468.8163<BR>
JTanenbaum@mofo.com
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">December&nbsp;23, 2008
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 18pt">Mr.&nbsp;Todd E. Hardiman<BR>
Associate Chief 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: 12pt">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 delivered by the Staff to the Company&#146;s counsel by way of a telephone call on December&nbsp;4,
2008.
</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"><B>The staff requested a description of the Company&#146;s analysis of the accounting for the options and
restricted stock issued by the Company in the reverse recapitalization of December&nbsp;31, 2006. The
analysis should cover both the vested and unvested options and restricted stock issued on that
date.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>RESPONSE: </B>On December&nbsp;31, 2006, the Company, which was then named Orthodontix, Inc., completed the
acquisition of Protalix Ltd., a privately-held Israeli biotechnology company. The acquisition was
effected through the merger (the &#147;Merger&#148;) of the Company&#146;s wholly-owned subsidiary, Protalix
Acquisition Co., Ltd., with Protalix Ltd. At the closing of the Merger, the former shareholders of
Protalix Ltd. received shares of the Company&#146;s common stock, par value $.001 per share (the &#147;Common
Stock&#148;), in exchange for all of their ordinary shares of Protalix Ltd. in a proportion equal to
approximately 61 shares of Common Stock for each ordinary share of Protalix Ltd. At and as of the
closing of the Merger, the former shareholders of Protalix Ltd.
</DIV>


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

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

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

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</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">received a number of shares of Common Stock equal to more than 99% of the outstanding shares of
Common Stock. As a result, Protalix Ltd. is now the Company&#146;s wholly-owned subsidiary. For
accounting purposes, the Merger was treated as a recapitalization of Protalix Ltd.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Stock Option Plan of Protalix Ltd. that was in effect prior to the Merger provided that if
Protalix Ltd. merged or consolidated with another corporation, all outstanding options granted by
Protalix Ltd. would automatically become fully vested unless they are assumed or substituted by the
successor entity. With respect to the Merger, the Company agreed to assume all of the outstanding
options issued by Protalix Ltd. to both employees and non-employees prior to the closing of the
Merger. In accordance with the terms and conditions of the Merger Agreement and Plan of
Reorganization made and entered into in connection with the Merger, all of the outstanding options
and warrants of Protalix Ltd. at the closing were exchanged for options and warrants of the
Company. In connection with the exchange, the Company issued options and warrants to purchase
9,004,061 shares of Common Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All of the options issued by the Company in exchange for options of Protalix Ltd. in connection
with the Merger were identical to the options they replaced except that the number of shares of
Common Stock underlying each option, and the per share exercise price of the options, were adjusted
based upon the ratio used in the Merger to determine how many shares of Common Stock were to be
issued for each ordinary share of Protalix Ltd. surrendered. The aggregate exercise price remained
unchanged and there were no changes to the vesting schedule and terms of any option issued by the
Company pursuant to the terms and conditions of the Merger.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For accounting purposes, the Company treated the exchange of the options and warrants as a
modification of the surrendered options and warrants. According to Statement of Financial
Accounting Standards No.&nbsp;123(R) (&#147;Statement 123R&#148;), modifications to the terms of an award are
treated as an exchange of the original award for a new award, and result in the incurrence of
additional compensation cost for that incremental value. The incremental value is equal to the
difference between (a)&nbsp;the fair value of the modified award and (b)&nbsp;the value of the original award
immediately before its terms are modified. In calculating the incremental value of the
modification, the Company found that there was no change in the fair value of the options as a
result of the Merger. Accordingly, the Company did not record any incremental costs due to the
issuance of stock options in connection with the exchange of the Protalix Ltd. option in connection
with the Merger.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table provides the data analyzed by the Company in its determination that there was
no difference in the fair value of the options surrendered in connection with the Merger and the
options issued in replacement of such surrendered options. All figures are in thousands, except
per share data.
</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="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Immediately before</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Immediately after</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">the Merger</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">the Merger (1)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">Value of Ordinary Shares of <BR>
Protalix Ltd.
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$91.59
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$1.50</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Exercise Price range ($) (1)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0.01-59.40
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0.001-0.97</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top">Number of Options (2)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">147,412
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">9,004,061</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

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<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"><IMG src="y00827y0082701.gif" alt="(MORRISON FOERSTER LOGO)"><BR>&nbsp;<BR>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; margin-top: 6pt">
<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>There were five different exercise prices that applied to the outstanding options.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>The data does not include options to purchase 2,712,792 shares of Common Stock that
were granted immediately after the closing of the Merger with an exercise price equal to
$16.70. None of such options were exercisable as of December&nbsp;31, 2006.</TD>
</TR>
</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All other assumptions regarding dividend yield, expected volatility, risk-free interest rate and
expected life remained the same.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table provides the data relating to the options issued in connection with the closing
of the Merger.
</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="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Vested</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Unvested</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,670,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,474,685</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-Employees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,377,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,482,186 </TD>
    <TD nowrap>(1)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; margin-top: 6pt">
<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The data does not include options to purchase 2,712,792 shares of Common Stock that
were granted immediately after the closing of the Merger with an exercise price equal to
$16.70. None of such options were exercisable as of December&nbsp;31, 2006.</TD>
</TR>
</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of the Company did not change as compared before and after the Merger as the Company
(Orthodontix, Inc., at the time of the Merger) was not an operating entity, did not have any assets
or liabilities, other than approximately $877,000 in net assets, and was quoted on the OTC Bulletin
Board, which is not a major exchange. In addition, neither the Common Stock that was issued in
exchange for ordinary shares of Protalix Ltd., nor the Common Stock underlying the stock options
issued in connection with the Merger were registered with the Securities and Exchange Commission.
Rather, as of December&nbsp;31, 2006, all such shares of Common Stock were subject to trading
restrictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with Emerging Issues Task Force Issue (&#147;EITF&#148;) Topic No.&nbsp;D-90, the Company did not
record any increase in its equity as a result of exchange transaction. It should be noted that
since the Merger was treated as a recapitalization for accounting purposes, all of the
financial statements of the Company are those of the predecessor company, Protalix Ltd. The sole
exception is the share capital line item in the balance sheets. In addition, the Company&#146;s capital
accounts do not include any amounts assigned to share-based payments not yet recorded as expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Virtually all of the total share-based compensation expense recorded by the Company during fiscal
year 2007 resulted from the following two grants to non-employees recorded in 2007:
</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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On January&nbsp;1, 2006, Protalix Ltd. issued to two entities affiliated with the Chairman of
the Company&#146;s Board of Directors, Eli Hurvitz, options to purchase 1,753,027 shares of
Common Stock. The per share exercise price of the options is 0.01 New Israeli Shekels
(NIS). The options vest as follows: 10% of the options vested at the date of the</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

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

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<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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>appointment (January&nbsp;1, 2006) and an additional 10% of the options vest at the end of each
three-month period thereafter, provided that Mr.&nbsp;Hurvitz continues to serve as the Chairman
of the Board. The Chairman is not an employee of the Company. Accordingly, the accounting
model followed by the Company in connection with this grant is EITF 96-18. The Company
recorded stock compensation expense of $1,085,000; $4,731,000; $877,000; and $596,000 for
the four quarters of 2007, respectively. The per share common stock value used in the
foregoing calculations was $6.19, $26.99, $5.00 and $3.40, respectively.</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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On December&nbsp;31, 2006, immediately after the closing of the Merger, the Company issued to
a consultant options to purchase 387,542 shares of Common Stock in consideration for
services to be provided to the Company. Unlike the other options, this option was not
issued to replace options issued by Protalix Ltd. prior to the Merger. The options
originally vested in five equal increments commencing upon the date that the Common Stock
being listed by the American Stock Exchange and on the next four six-month anniversaries of
such date. On February&nbsp;28, 2007, the vesting schedule of the options was modified as
follows: 40% of the options shall vest on March&nbsp;1, 2008 and an additional 15% of the
options vest in four equal installments on each of the following dates: June&nbsp;30, 2008,
December&nbsp;31, 2008, June&nbsp;30, 2009, and September&nbsp;30, 2009. The modification had no effect
on the accounting records of the Company. The per share exercise price of the
options is $16.70 per share.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company elected to recognize the stock-based compensation expense related to these awards using
the straight-line attribution method. The Company considered the following factors in determining
the attribution method to apply:
</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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>EITF 96-18, Issue 3, provides that changes in the fair value of outstanding awards to
nonemployees between interim reporting dates should be attributed in accordance with the
methods illustrated in Financial Interpretation 28. The Company believes that EITF 96-18,
Issue 3, relates to the requirement to remeasure the awards for changes in fair value
between interim reporting dates and does not prescribe the attribution method that must be
used.</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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Effective as of January&nbsp;1, 2006, for purposes of the Company&#146;s financial statements,
FIN 28 was superseded by Statement 123R. Paragraph&nbsp;42 of Statement 123R allows companies
to make a policy election about whether to recognize compensation cost for an employee
award with only service conditions that has a graded vesting schedule on a straight-line
method over the requisite service period for each separately vesting portion of the award
as if the award was, in substance, multiple awards, or on a straight-line basis over the
requisite service period of the last separately vesting portion of the award.</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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>While Statement 123R applies to employee awards, Statement 123R may also be applied to
non-employee awards when such non-employee awards have a service only condition. Staff
Accounting Bulletin (SAB)&nbsp;107 states as follows:</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">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Statement 123R does not supersede any of the authoritative literature that
specifically addresses accounting for share-based payments with</TD>
</TR>

</TABLE>
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><IMG src="y00827y0082701.gif" alt="(MORRISON FOERSTER LOGO)"><BR>&nbsp;<BR>
</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">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>nonemployees. For example, Statement 123R does not specify the measurement
date for share-based payment transactions with nonemployees when the
measurement of the transaction is based on the fair value of the equity
instruments issued. For determining the measurement date of equity
instruments issued in share-based transactions with nonemployees, a company
should refer to Emerging Issues Task Force (&#147;EITF&#148;) Issue No.&nbsp;96-18,
Accounting for Equity Instruments That Are Issued to Other Than Employees
for Acquiring, or in Conjunction with Selling, Goods or Services.</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">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>With respect to questions regarding nonemployee arrangements that are not
specifically addressed in other authoritative literature, the staff believes
that the application of guidance in Statement 123R would generally result in
relevant and reliable financial statement information. As such, the staff
believes it would generally be appropriate for entities to apply the
guidance in Statement 123R by analogy to share-based payment transactions
with nonemployees unless other authoritative accounting literature more
clearly addresses the appropriate accounting, or the application of the
guidance in Statement 123R would be inconsistent with the terms of the
instrument issued to a nonemployee in a share-based payment arrangement.</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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Since EITF 96-18 does not prescribe the attribution model to apply for a graded vesting
award, the Company elected to use straight-line attribution for the options granted to
nonemployees based upon the guidance set forth in Statement 123R. The Company does not
believe that there is any other authoritative accounting literature that more clearly
addresses the appropriate accounting of the nonemployee options. In addition, the Company
does not believe that the guidance in Statement 123R is inconsistent with the terms of the
options granted by the Company to nonemployees.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company applies the straight-line attribution accounting treatment as follows. Upon having
vested in an individual tranche of an option granted to an nonemployee, the Company deems the
nonemployee&#146;s performance for that tranche to be completed. The Company also deems the vesting
date for each tranche of an option to be the final measurement date of that tranche. Therefore,
the Company does not remeasure vested tranches in subsequent periods. For individual tranches for
which the applicable vesting/service period crossed interim periods (such as the options issued to
the consultant), the Company remeasures the tranches until the final vesting date of the tranche.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company recognizes that other attribution methods may be acceptable methods for the calculation
of the stock-based compensation expense of awards to nonemployees. However, the Company believes
that the method described above conforms not only with the applicable accounting literature but
also with the substance of the arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As indicated in the letter dated October&nbsp;16, 2008, the Company applied the simplified method for
the expected term of the stock options. Had the Company applied the contractual term of the
options rather that the simplified method, the recorded compensation expense would have been
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /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"><IMG src="y00827y0082701.gif" alt="(MORRISON FOERSTER LOGO)"><BR>&nbsp;<BR>
</DIV>

<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">approximately $143,000 and $420,000 more for each of fiscal year 2007 and the first three quarters
of 2008, respectively. The Company does not believe that either of these amounts are material for
accounting purposes.</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 call the undersigned at the telephone number set forth above or Joseph Magnas at
212-336-4170 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: 18pt">Sincerely,
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">/s/ James R. Tanenbaum
</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">cc:</TD>
    <TD>&nbsp;</TD>
    <TD>David Aviezer, Ph.D.<BR>
Yossi Maimon</TD>
</TR>
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>




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