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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
      FOR ANNUAL AND TRANSITION
    REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31,
    2010oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   001-33357
    (Commission file number)
      PROTALIX BIOTHERAPEUTICS,
    INC. (Exact name of
    registrant as specified in its charter)
      Florida

65-0643773State or other jurisdiction
    of
    incorporation or organization

(I.R.S. Employer
    Identification No.)2 Snunit Street
    Science Park
    POB 455
    Carmiel, Israel(Address of principal
    executive offices)

20100(Zip Code)   Registrants telephone number, including area code
 972-4-988-9488
      Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon stock, par value $0.001 per share

NYSE AMEX   Securities registered pursuant to Section 12(g) of the
    Act:
 None
      o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller reporting
    company o (Do not check if a smaller
    reporting company)
  Rule 12b-2 o þ




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FORM 10-K
  TABLE OF
    CONTENTS
   
 PagePART ICautionary Statement Regarding Forward-Looking
    Statements


1Item 1.


Business


2Item 1A.


Risk Factors


35Item 1B.


Unresolved Staff Comments


58Item 2.


Properties


58Item 3.


Legal Proceedings


58Item 4.


(Removed and Reserved)


59PART IIItem 5.


Market for Registrants Common Equity, Related Stockholder
    Matters and Issuer Purchases of Equity Securities


59Item 6.


Selected Financial Data


61Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


62Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


72Item 8.


Financial Statements and Supplementary Data


72Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


73Item 9A.


Controls and Procedures


73Item 9B.


Other Information


74PART IIIItem 10.


Directors, Executive Officers and Corporate Governance


75Item 11.


Executive Compensation


79Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


90Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


92Item 14.


Principal Accountant Fees and Services


95PART IVItem 15.


Exhibits and Financial Statement Schedules


95Signatures


98EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   i




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PART I  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  Form 10-K,
    
    delays in the approval or the potential rejection of any
    applications we file with the U.S. Food and Drug
    Administration, or FDA, or other regulatory authorities,
    including the New Drug Application (NDA) we filed with the FDA,
    the marketing application we submitted to the Israeli Ministry
    of Health, and the Marketing Authorization Application (MAA) we
    submitted to each of the European Medicines Agency and the
    National Sanitary Vigilance Agency, an agency of the Ministry of
    Health of Brazil, for taliglucerase alfa;
    the inherent risks and uncertainties in developing the types of
    drug platforms and products we are developing;
    delays in our preparation and filing of applications for
    regulatory approval in the United States, the European Union,
    Israel, Brazil and elsewhere;
    any lack of progress of our research and development (including
    the results of our clinical trials);
    our ability to establish and maintain strategic license,
    collaboration and distribution arrangements and to manage our
    relationship with Pfizer Inc., Teva Ltd. or with any other
    collaborator, distributor or partner;
    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;
    risks relating to biogeneric legislation
    and/or
    healthcare reform in the United States or elsewhere;
    our ability to obtain additional financing required to fund our
    research programs and the expansion of our manufacturing
    capabilities;
    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 enter into supply arrangements with the Ministry
    of Health of Brazil or other parties and to supply drug product
    pursuant to such arrangements;




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
    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 any of our product candidates, if approved;
    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 in successfully enforcing our intellectual
    property rights against third parties;
    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
    subsidiaries, our manufacturing facilities and our customers,
    suppliers, distributors, collaborative partners, licensees and
    clinical trial sites; and
    other risks and uncertainties detailed in Section 1A of
    this Annual Report on Form
    10-K.  Form 10-K
  Item 1.
    Business  tm
   2




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tm tm
       3




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®
 4




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scale-up
    proof-of-concept
   5




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Industry
    Overview
      ® ® ® ® ® ®
     6




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ProCellEx:
    Our Proprietary Protein Expression System
      Competitive
    Advantages of Our ProCellEx Protein Expression System
    Ability to Penetrate Certain Patent-Protected
    Markets.
 7




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Significantly Lower Capital and Production
    Costs.
  Elimination of the Risk of Viral Transmission or Infection by
    Mammalian Components.
  More Effective and Potent End Product Relative to Mammalian
    Based Systems.
 8




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Broad Range of Expression Capabilities.
  Our
    Strategy
    Facilitate the successful development and commercialization
    of taliglucerase alfa by Pfizer.
  Obtain Regulatory Approval for Taliglucerase Alfa for the
    Treatment of Gaucher Disease.
 9




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Develop a Pipeline of Innovative or Biosimilar Versions of
    Recombinant Therapeutic Proteins.
  Collaborate with Third Party Pharmaceutical Suppliers and
    build a Targeted Sales and Marketing
    Infrastructure.
  Establish Development and Commercialization Alliances with
    Corporate Partners.
  Acquire or In-License New Technologies, Products or
    Companies.
  Leverage Strength and Experience of Our Management Team and
    Board of Directors.
 10




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Our
    Pipeline Drug Candidates
  Our
    Lead Product Candidate, Taliglucerase Alfa
    10-60
      Increased Glycan Efficacy and Consistency.
 11




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Longer Half-Life.
  Cost-Effective. set-up
    in-vitro
      Gaucher
    Disease Background
   12




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Current
    Treatments for Gaucher Disease
        Taliglucerase
    Alfa Development Program
   13




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Laboratory
    Testing and Preclinical Studies of Taliglucerase Alfa
      
    an equivalent to superior level of enzymatic activity;
    enhanced uptake based on observed GlcCer substrate degradation;
    and
    a prolonged half-life.  Phase I
    Clinical Trial
            Phase III
    Clinical Trial
   14




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Phase III
    Clinical Trial Results
  30 U/kg
   15




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Figure 1.  MRI validated method-2 blinded readers,
    Intra-reader variability
    £
    0.5%; Inter-reader variability
    £
    1.00%
  
    Figure 2.  1st Major Secondary endpoint:
    Change in Hemoglobin (g/dL) From Baseline  ITT vs.
    Anemic patients
  
 16




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Figure 3.  2nd Major Secondary Endpoint: Liver
    Volume % Change from Baseline, MRI validated method-2 blinded
    readers; Intra-reader variability
    £
    0.5%; Inter-reader variability
    £
    1.00%
  
  Figure 4.  3rd Major Secondary Endpoint:
    Platelet Counts Change from Baseline
  
         17




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10-60
  Other
    Drug Candidates in Our Pipeline
    PRX-102
     18




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Acetylcholinesterase
  country-by-country
  country-by-country
   19




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pr-antiTNF
    proof-of-concept
  Commercialization
    Agreement
   20




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Strategic
    Collaborations
  Teva
    Pharmaceutical Industries
    Weizmann
    Institute of Science
     21




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Intellectual
    Property
      and/or
  
    With respect to our ProCellEx protein expression system, we have
    been issued, and hold licensed rights to, patents in the United
    States, the European Union, Israel, Canada, the Czech Republic,
    Hungary, Japan, Poland, Mexico, Hong Kong and India, and to 10
    pending patent applications. Among other things, the patents
    cover the methods that we use for culturing and harvesting plant
    cells and/or
    tissues in consecutive cycles. The issued patents in this patent
    family are expected to expire in 2017.
    With respect to our ProCellEx protein expression system, we also
    hold 14 patent applications relating to the large scale
    production of proteins in cultured plant cells. The patents to
    issue in the future based on the pending patent applications in
    this patent family are expected to expire in 2028. 22




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
    We hold a patent family containing five granted patents in
    India, South Africa, Russia, Australia and the Ukraine, and 36
    patent applications, relating to the production of glycosylated
    lysosomal proteins in our plant culture platform, particularly
    proteins having a terminal mannose glycosylation, including
    taliglucerase alfa. The issued patents and any patents to issue
    in the future based on pending patent applications in this
    patent family are expected to expire in 2024.
    We hold a patent family containing one granted and three pending
    patent applications relating to a system and method for
    production of antibodies in a plant cell culture, and antibodies
    produced in such a system. The patents to issue in the future
    based on the patent applications in this patent family are
    expected to expire in 2025.
    We hold a patent family containing one issued patent in South
    Africa and 12 pending patent applications relating to a new
    method for delivering active recombinant proteins systemically
    through oral administration of transgenic plant cells. The
    issued patents and any patents to issue in the future based on
    patent applications in this patent family are expected to expire
    in 2026.
    We hold a patent family containing seven pending patent
    applications relating to saccharide containing protein
    conjugates. The patents to issue in the future based on the
    patent applications in this patent family will expire in 2028.
    Our patent portfolio includes a patent that we co-own that
    covers human glycoprotein hormone and chain splice variants,
    including isolated nucleic acids encoding these variants. More
    specifically, this patent covers a new splice variant of human
    FSH. This patent was issued in the United States and is expected
    to expire in 2026.
    With respect to taliglucerase alfa, we have licensed the rights
    to two patents from Virginia Tech Intellectual Properties, Inc.,
    or Virginia Tech, that are expected to expire in 2016. We also
    hold the licensed rights from Yeda to one granted and two
    pending patent applications with respect to the research and
    development of the glucocerebrosidase (GCD) protein.
    With respect to acetylcholinesterase, we have licensed the
    rights to three patents issued in the United States that are
    expected to expire in 2013, 2017 and 2021, and to five patent
    applications from Yissum.       23




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and/or
  agreed-upon
  Manufacturing
       24




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Raw
    Materials and Suppliers
      Competition
       25




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Scientific
    Advisory Board
    Name

AffiliationProfessor Aaron Ciechanover, M.D., D.Sc.

Laureate of the Nobel Prize in ChemistryDistinguished research Professor at the Cancer and Vascular
    Biology Research Center of the Rappaport Research Institute and
    Faculty of Medicine at the TechnionAmerican Academy of Arts and Sciences, MemberProfessor Gad Galili, Ph.D.

Former Chairman of the Department of PlantSciences, The Weizmann Institute of Science,Rehovot, IsraelProfessor Ari Zimran, M.D.

Director of the Gaucher Clinic, Shaare Zedek Medical Center,
    Jerusalem, IsraelAssociate Professor of Medicine, Hebrew University-Hadassah
    Medical School, Jerusalem, Israel   Government
    Regulation
     26




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27




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International
    Regulation
   28




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Israeli
    Government Programs
    General
    Corporate Tax Structure in Israel
    Law for
    the Encouragement of Capital Investments, 1959
   29




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10-year
    Rate ofPercent of Foreign Ownership

Reduced Tax0- 49%


25
%49- 74%


20
%74- 90%


15
%90-100%


10
%    30




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12-year
          
    the Approved Enterprises revenues from any single country
    or a separate customs territory may not exceed 75% of the
    Approved Enterprises total revenues; or
    at least 25% of the Approved Enterprises revenues during
    the benefits period must be derived from sales into a single
    country or a separate customs territory with a population of at
    least 12 million.      Encouragement
    of Industrial Research and Development Law, 1984
   31




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
    in the event of a sale of the know-how itself to a non
    affiliated third party, provided that upon such sale the owner
    of the know-how pays to the OCS an amount, in cash, as set forth
    in the Research Law. In addition, the amendment provides that if
    the purchaser of the know-how gives the selling Israeli company
    the right to exploit the know-how by way of an exclusive,
    irrevocable and unlimited license, the research committee may
    approve such transfer in special cases without requiring a cash
    payment.
    in the event of a sale of the company which is the owner of
    know-how, pursuant to which the company ceases to be an Israeli
    company, provided that upon such sale, the owner of the know-how
    makes a cash payment to the OCS as set forth in the Research Law.
    in the event of an exchange of know-how such that in exchange
    for the transfer of know-how outside of Israel, the recipient of
    the know-how transfers other know-how to the company in Israel
    in a manner in which the OCS is convinced that the Israeli
    economy realizes a greater, overall benefit from the exchange of
    know-how.     32




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Special
    Provisions Relating to Taxation under Inflationary
    Conditions
    
    Where a companys equity, as calculated under the
    Inflationary Adjustments Law, exceeds the depreciated cost of
    its fixed assets (as defined in the Inflationary Adjustments
    Law), a deduction from taxable income is permitted equal to this
    excess multiplied by the applicable annual rate of inflation.
    The maximum deduction permitted under this provision in any
    single tax year is 70% of taxable income. The unused portion
    linked to the Israeli consumer price index, may be carried
    forward.
    Where a companys depreciated cost of fixed assets exceeds
    its equity, the excess multiplied by the applicable annual rate
    of inflation is added to taxable income.
    Subject to specified limitations, depreciation deductions
    carryforwards on fixed assets and losses are adjusted for
    inflation based on the change in the consumer price index.    Law for
    the Encouragement of Industry (Taxes), 1969
      
    amortization of the cost of purchased know-how and patents over
    an eight-year period for tax purposes;
    accelerated depreciation rates on equipment and buildings;
    under specified conditions, an election to file consolidated tax
    returns with other related Israeli Industrial Companies; and
    expenses related to a public offering are deductible in equal
    amounts over three years.    Tax
    Benefits for Research and Development
   33




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Employees
    Company
    Background
  one-for-ten Form 10-K
    tm Form 10-K
  Available
    Information
  Form 10-K, Form 10-Q, Form 8-K
   34




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Item 1A.
    Risk
    Factors  You should carefully consider the risks described below
    together with the other information included in this Annual
    Report on
    Form 10-K.
    Our business, financial condition or results of operations could
    be adversely affected by any of these risks. If any of these
    risks occur, the value of our common stock could decline.
  Risks
    Related to Our Business
  We
    currently have no significant product revenues and will need to
    raise additional capital to operate our business, which may not
    be available on favorable terms, or at all, and which will have
    a dilutive effect on our shareholders.
   35




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We are
    not currently profitable and may never become profitable which
    would have a material adverse effect on our business and results
    of operations and could negatively impact the value of our
    common stock.
    
    continue to undertake preclinical development and clinical
    trials for our current and new drug candidates;
    seek regulatory approvals for our drug candidates;
    implement additional internal systems and infrastructure;
    seek to license-in additional technologies to develop; and
    hire additional personnel.    We
    have a limited operating history which may limit the ability of
    investors to make an informed investment decision.
    
    continuing to undertake preclinical development and clinical
    trials;
    participating in regulatory approval processes;
    formulating and manufacturing products; and
    conducting sales and marketing activities.    Our
    ProCellEx protein expression system is based on our proprietary
    plant cell-based expression technology which has a limited
    history and any material problems with the system, which may be
    unforeseen, may have a material adverse effect on our business
    and results of operations.
   36




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We
    currently depend heavily on the success of taliglucerase alfa,
    our lead product candidate. Any failure to commercialize
    taliglucerase alfa, or the experience of significant delays in
    doing so, will have a material adverse effect on our business,
    results of operations and financial condition.
    
    successful completion of our ongoing studies of taliglucerase
    alfa;
    obtaining marketing approvals from the FDA and other foreign
    regulatory authorities;
    maintaining the cGMP compliance of our manufacturing facility or
    establishing manufacturing arrangements with third parties;
    the successful audit of our facilities by the FDA and other
    foreign regulatory authorities;
    Pfizers efforts under the Pfizer agreement;
    our development of a successful sales and marketing organization
    for taliglucerase in Israel;
    the availability of reimbursement to patients from healthcare
    payors for our drug products, if approved;
    a continued acceptable safety and efficacy profile of our
    product candidates following approval; and
    other risks described in these Risk Factors.    Our
    strategy, in many cases, is to enter into collaboration
    agreements with third parties to leverage our ProCellEx system
    to develop product candidates. If we fail to enter into these
    agreements or if we or the third parties do not perform under
    such agreements or terminate or elect to discontinue the
    collaboration, it could have a material adverse affect on our
    revenues.
   37




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All of
    our product candidates other than taliglucerase alfa and our
    acetycholinesterase product are in preclinical or research
    stages. If we are unable to develop and commercialize our
    product candidates, our business will be adversely
    affected.
    
    the research methodology used may not be successful in
    identifying potential product candidates;
    competitors may develop alternatives that render our product
    candidates obsolete;
    a product candidate may on further study be shown to have
    harmful side effects or other characteristics that indicate it
    is unlikely to be effective or otherwise does not meet
    applicable regulatory approval;
    a product candidate is not capable of being produced in
    commercial quantities at an acceptable cost, or at all; or
    a product candidate may not be accepted by patients, the medical
    community or third-party payors.    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.
   38




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
    delay commercialization of, and our ability to derive product
    revenues from, such drug candidate;
    delay the regulatory-related milestone payments we anticipate
    receiving from Pfizer;
    require us to perform costly procedures with respect to such
    drug candidate; or
    otherwise diminish any competitive advantages that we may have
    with respect to such drug candidate.    The
    fast track designation for the development program
    of taliglucerase alfa for the treatment of Gaucher disease may
    not lead to a faster development or regulatory review or
    approval process or increase the likelihood that taliglucerase
    alfa will receive regulatory approval for the treatment of
    Gaucher disease.
    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.
   39




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
    unforeseen safety issues;
    determination of dosing issues;
    lack of effectiveness during clinical trials;
    slower than expected rates of patient recruitment;
    inability to monitor patients adequately during or after
    treatment;
    inability or unwillingness of medical investigators and
    institutional review boards to follow our clinical
    protocols; and
    lack of sufficient funding to finance the clinical trials.    If the
    results of our clinical trials do not support our claims
    relating to any drug candidate or if serious side effects are
    identified, the completion of development of such drug candidate
    may be significantly delayed or we may be forced to abandon
    development altogether, which will significantly impair our
    ability to generate product revenues.
    We may
    find it difficult to enroll patients in our clinical trials,
    which could cause significant delays in the completion of such
    trials or may cause us to abandon one or more clinical
    trials.
  and/or
 40




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If
    physicians, patients, third party payors and others in the
    medical community do not accept and use our drugs, our ability
    to generate revenue from sales of our products under development
    will be materially impaired.
    
    perceptions by physicians, patients, third party payors and
    others in the medical community, about the safety and
    effectiveness of our drug candidates;
    the willingness of the target patient population to try new
    therapies and of physicians to prescribe these therapies;
    the prevalence and severity of any side effects, including any
    limitations or warnings contained in our products approved
    labeling;
    pharmacological benefit of our products relative to competing
    products and products under development;
    the efficacy and potential advantages relative to competing
    products and products under development;
    relative convenience and ease of administration;
    effectiveness of education, marketing and distribution efforts
    by us and our licensees and distributors, if any;
    publicity concerning our products or competing products and
    treatments;
    reimbursement of our products by third party payors; and
    the price for our products and competing products.    Because
    our clinical trials depend upon third-party researchers, the
    results of our clinical trials and such research activities are
    subject to delays and other risks which are, to a certain
    extent, beyond our control, which could impair our clinical
    development programs and our competitive position.
   41




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The
    manufacture of our products is an exacting and complex process,
    and if we or one of our materials suppliers encounter problems
    manufacturing our products, it will have a material adverse
    effect on our business and results of operations.
    We
    rely on third parties for final processing of taliglucerase
    alfa, which exposes us to a number of risks that may delay
    development, regulatory approval and commercialization of our
    product candidates or result in higher product
    costs.
  and/or and/or
  We
    have no experience selling, marketing or distributing products
    and no internal capability to do so.
    
    our inability to recruit and retain adequate numbers of
    effective sales and marketing personnel;
    the inability of sales personnel to obtain access to or persuade
    adequate numbers of physicians to prescribe our products; 42




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
    the lack of complementary products to be offered by sales
    personnel, which may put us at a competitive disadvantage
    relative to companies with more extensive product lines; and
    unforeseen costs and expenses associated with creating and
    sustaining an independent sales and marketing organization.    If the
    market opportunities for our current product candidates are
    smaller than we believe they are, our revenues may be adversely
    affected and our business may suffer.
    We may
    enter into distribution arrangements and marketing alliances for
    certain products and any failure to successfully identify and
    implement these arrangements on favorable terms, if at all, may
    impair our ability to commercialize our product
    candidates.
    
    we may be required to relinquish important rights to our
    products or product candidates;
    we may not be able to control the amount and timing of resources
    that our distributors or collaborators may devote to the
    commercialization of our product candidates;
    our distributors or collaborators may experience financial
    difficulties;
    our distributors or collaborators may not devote sufficient time
    to the marketing and sales of our products; and
    business combinations or significant changes in a
    collaborators business strategy may adversely affect a
    collaborators willingness or ability to complete its
    obligations under any arrangement.   43




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Developments
    by competitors may render our products or technologies obsolete
    or non-competitive which would have a material adverse effect on
    our business and results of operations.
            
    developing drugs;
    undertaking preclinical testing and human clinical trials;
    obtaining FDA and other regulatory approvals of drugs;
    formulating and manufacturing drugs; and
    launching, marketing and selling drugs.   44




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If we
    fail to adequately protect or enforce our intellectual property
    rights or secure rights to third party patents, the value of our
    intellectual property rights would diminish and our business,
    competitive position and results of operations would
    suffer.
      
    the degree and range of protection any patents will afford us
    against competitors and those who infringe upon our patents,
    including whether third parties will find ways to invalidate or
    otherwise circumvent our licensed patents;
    if and when patents will issue;
    whether or not others will obtain patents claiming aspects
    similar to those covered by our licensed patents and patent
    applications; or
    whether we will need to initiate litigation or administrative
    proceedings, which may be costly, and whether we win or lose.      We
    rely on confidentiality agreements that could be breached and
    may be difficult to enforce which could have a material adverse
    effect on our business and competitive position.
   45




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
    these agreements may be breached;
    these agreements may not provide adequate remedies for the
    applicable type of breach; or
    our trade secrets or proprietary know-how will otherwise become
    known.    If we
    infringe the rights of third parties we could be prevented from
    selling products, forced to pay damages and required to defend
    against litigation which could result in substantial costs and
    may have a material adverse effect on our business and results
    of operations.
    
    obtain licenses, which may not be available on commercially
    reasonable terms, if at all;
    redesign our products or processes to avoid infringement;
    stop using the subject matter claimed in the patents held by
    others, which could cause us to lose the use of one or more of
    our drug candidates;
    defend litigation or administrative proceedings that may be
    costly whether we win or lose, and which could result in a
    substantial diversion of management resources; or
    pay damages.    If we
    cannot meet requirements under our license agreements, we could
    lose the rights to our products, which could have a material
    adverse effect on our business.
   46




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##### Table of Contents



If we
    in-license drug candidates, we may delay or otherwise adversely
    affect the development of our existing drug candidates, which
    may negatively impact our business, results of operations and
    financial condition.
    If we
    are unable to successfully manage our growth, there could be a
    material adverse impact on our business, results of operations
    and financial condition.
    If we
    acquire companies, products or technologies, we may face
    integration risks and costs associated with those acquisitions
    that could negatively impact our business, results from
    operations and financial condition.
   47




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##### Table of Contents



We
    depend upon key employees and consultants in a competitive
    market for skilled personnel. If we are unable to attract and
    retain key personnel, it could adversely affect our ability to
    develop and market our products.
      Our
    collaborations with outside scientists and consultants may be
    subject to restriction and change.
    Under
    current U.S. and Israeli law, we may not be able to enforce
    employees covenants not to compete and therefore may be
    unable to prevent our competitors from benefiting from the
    expertise of some of our former employees.
   48




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##### Table of Contents



If
    product liability claims are brought against us, it may result
    in reduced demand for our products or damages that exceed our
    insurance coverage.
  and/or
  Reimbursement
    may not be available for our product candidates, which could
    diminish our sales or affect our ability to sell our products
    profitably.
    Reforms
    in the healthcare industry and the uncertainty associated with
    pharmaceutical pricing, reimbursement and related matters could
    adversely affect the marketing, pricing and demand for our
    products, if approved.
   49




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##### Table of Contents



We are
    subject to healthcare reform measures, including legislation,
    regulatory proposals and healthcare payor initiatives that may
    increase our costs and adversely affect our profitability and/or
    ability to obtain adequate reimbursement for our product
    candidates.
  and/or
    
    An annual, nondeductible fee on any entity that manufactures or
    imports certain branded prescription drugs and biologic agents
    into the United States, apportioned among these entities
    according to their market share in certain federal government
    healthcare programs (excluding sales of any drug or biologic
    product marketed for an orphan indication), beginning in 2011;
    An increase in the rebates a manufacturer must pay under the
    Medicaid Drug Rebate Program, retroactive to January 1,
    2010, to 23.1% and 13% of the average manufacturer price for
    branded and generic drugs, respectively;
    A new Medicare Part D coverage gap discount program, in
    which manufacturers must agree to offer 50% point-of sale
    discounts off negotiated prices of applicable brand drugs to
    eligible beneficiaries during their coverage gap period, as a
    condition for the manufacturers outpatient drugs to be
    covered under Medicare Part D, beginning in 2011;
    Extension of manufacturers Medicaid rebate liability to
    covered drugs dispensed to individuals who are enrolled in
    Medicaid managed care organizations, effective March 23,
    2010;
    Expansion of eligibility criteria for Medicaid programs by,
    among other things, allowing states to offer Medicaid coverage
    to additional individuals beginning in April 2010 and by adding
    new mandatory eligibility categories for certain individuals
    with income at or below 133% of the Federal Poverty Level
    beginning in 2014, thereby potentially increasing both the
    volume of sales and manufacturers Medicaid rebate
    liability;
    Expansion of the entities eligible for discounts under the
    Public Health Service pharmaceutical pricing program, effective
    January 2010; 50




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##### Table of Contents




    New requirements to report certain financial arrangements with
    physicians and others, including reporting any transfer of
    value made or distributed to prescribers and other
    healthcare providers and reporting any investment interests held
    by physicians and their immediate family members during each
    calendar year beginning in 2012, with reporting starting in 2013;
    A new requirement to annually report drug samples that
    manufacturers and distributors provide to physicians, effective
    April 1, 2012;
    A licensure framework for follow-on biologic products; and
    A new Patient-Centered Outcomes Research Institute to oversee,
    identify priorities in, and conduct comparative clinical
    effectiveness research, along with funding for such research.    We may
    be subject, directly or indirectly, to federal and state
    healthcare fraud and abuse and false claims laws and
    regulations. If we are unable to comply, or have not fully
    complied, with such laws, we could face substantial
    penalties.
    § 1320a-7b,
   51




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Governments
    outside the United States tend to impose strict price controls
    and reimbursement approval policies, which may adversely affect
    our prospects for generating revenue.
    Risks
    Relating to Our Operations in Israel
  Potential
    political, economic and military instability in the State of
    Israel, where the majority of our senior management and our
    research and development facilities are located, may adversely
    affect our results of operations.
   52




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##### Table of Contents



Our
    operations may be disrupted by the obligations of our personnel
    to perform military service which could have a material adverse
    effect on our business.
    Because
    a certain portion of our expenses is incurred in New Israeli
    Shekels, or NIS, our results of operations may be seriously
    harmed by currency fluctuations and inflation.
    The
    tax benefits available to us require that we meet several
    conditions and may be terminated or reduced in the future, which
    would increase our taxes and would have a material adverse
    effect on our business and results of operations.
   53




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##### Table of Contents



The
    Israeli government grants we have received for certain research
    and development expenditures restrict our ability to manufacture
    products and transfer technologies outside of Israel and require
    us to satisfy specified conditions. If we fail to satisfy these
    conditions, we may be required to refund grants previously
    received together with interest and penalties which could have a
    material adverse effect on our business and results of
    operations.
      
    we may be required to pay the OCS a significant portion of the
    consideration we receive upon any sale of such technology to an
    entity that is not Israeli. The scope of the support received,
    the royalties that were paid by us, the amount of time that
    elapses between the date on which the know-how is transferred
    and the date on which the grants were received, as well as the
    sale price, will be taken into account in order to calculate the
    amount of the payment; and
    the transfer of manufacturing rights could be conditioned upon
    an increase in the royalty rate and payment of increased
    aggregate royalties (up to 300% of the amount of the grant plus
    interest, depending on the percentage of the manufacturing that
    is foreign).    Investors
    may have difficulties enforcing a U.S. judgment, including
    judgments based upon the civil liability provisions of the U.S.
    federal securities laws against us, our executive officers and
    most of our directors or asserting U.S. securities laws claims
    in Israel.
  non-U.S. resident
    
    the judgment was rendered by a court which was, according to the
    laws of the state of the court, competent to render the judgment; 54




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
    the judgment may no longer be appealed;
    the obligation imposed by the judgment is enforceable according
    to the rules relating to the enforceability of judgments in
    Israel and the substance of the judgment is not contrary to
    public policy; and
    the judgment is executory in the state in which it was given.    
    the judgment was obtained by fraud;
    there is a finding of lack of due process;
    the judgment was rendered by a court not competent to render it
    according to the laws of private international law in Israel;
    the judgment is at variance with another judgment that was given
    in the same matter between the same parties and that is still
    valid; or
    at the time the action was brought in the foreign court, a suit
    in the same matter and between the same parties was pending
    before a court or tribunal in Israel.  Risks
    Related to Investing in Our Common Stock
  The
    market price of our common stock may fluctuate
    significantly.
    
    the announcement of new products or product enhancements by us
    or our competitors;
    developments concerning intellectual property rights and
    regulatory approvals;
    variations in our and our competitors results of
    operations;
    the results of our ongoing studies regarding our lead product
    candidate taliglucerase alfa, or communications from the FDA or
    other regulatory authorities regarding our NDA or MAA for
    taliglucerase alfa or similar filings or submissions, including
    the approval of any such filings by the FDA or other applicable
    regulatory authorities, or any delay of failure by the FDA or
    other applicable regulatory authorities to approve any such
    filings;
    changes in earnings estimates or recommendations by securities
    analysts, if our common stock is covered by analysts;
    developments in the biotechnology industry; and
    general market conditions and other factors, including factors
    unrelated to our operating performance.   55




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All
    liabilities of our company have survived the merger and there
    may be undisclosed liabilities that could harm our revenues,
    business, prospects, financial condition and results of
    operations.
    Future
    sales of our common stock could reduce our stock
    price.
  Rule 10b5-1
  Directors,
    executive officers, principal shareholders and affiliated
    entities own a significant percentage of our capital stock, and
    they may make decisions that an investor may not consider to be
    in the best interests of our shareholders.
    Failure
    to maintain effective internal controls in accordance with
    Section 404 of the Sarbanes-Oxley Act could have a material
    adverse effect on our business and operating results. In
    addition, current and potential shareholders could lose
    confidence in our financial reporting, which could have a
    material adverse effect on the price of our common
    stock.
       56




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Compliance
    with changing regulation of corporate governance and public
    disclosure may result in additional expenses, divert
    managements attention from operating our business which
    could have a material adverse effect on our
    business.
    We are
    a holding company with no operations of our own.
    The
    issuance of preferred stock or additional shares of common stock
    could adversely affect the rights of the holders of shares of
    our common stock.
     57




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12-month 12-month
  Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Item 3.
    Legal
    Proceedings   58




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##### Table of Contents



Item 4.
    (Removed
    and Reserved)  PART II
  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    Price RangeHigh

LowFourth Quarter 2010

$
10.00


$
8.40Third Quarter 2010

$
9.00


$
5.99Second Quarter 2010

$
7.00


$
5.84First Quarter 2010

$
7.70


$
6.56Fourth Quarter 2009

$
12.14


$
6.62Third Quarter 2009

$
8.31


$
4.51Second Quarter 2009

$
5.24


$
2.10First Quarter 2009

$
2.89


$
1.80   mark-ups,
   59




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STOCK
    PERFORMANCE GRAPH
    The stock price performance shown on the graph below
    represents historical price performance and is not necessarily
    indicative of any future stock price performance. Specifically,
    during the period from December 31, 2005 through
    December 31, 2006, our company did not have any operations
    and our common stock was quoted on the
    OTC® Bulletin Board. The historical performance of our
    common stock prior to January 2, 2007, represents the
    performance of our company prior to the merger on
    December 31, 2006, and, therefore, is not indicative of the
    performance of our common stock after the merger or the
    performance of our common stock after it was listed for trade on
    the NYSE AMEX on March 12, 2007.
  COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL
    RETURN*Among Protalix BioTherapeutics, Inc., the NYSE Amex
    Composite Index
    and the NYSE Arca Biotechnology Index
  
  *
    
    $100 invested on 12/31/05 in stock or index, including
    reinvestment of dividends.
    Fiscal year ending December 31.  Notwithstanding anything to the contrary set forth in any
    of our previous filings under the Securities Act of 1933, as
    amended, or the Exchange Act, which might incorporate future
    filings made by us under those statutes, this Stock Performance
    Graph will not be incorporated by reference into any of those
    prior filings, nor will such report or graph be incorporated by
    reference into any future filings made by us under those
    Acts.
 60




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Item 6.
    Selected
    Financial Data  Form 10-K.
  Year Ended December 31,2006


2007


2008


2009


2010(In thousands, except share and per share amounts)Consolidated Statement of Operations Data:Revenues













$
388


$
11,244Cost of revenues














3,575



4,383Gross profit (loss)














(3,187
)


6,861Research and development expenses, net

$
5,246


$
13,570


$
17,401


$
21,638



29,951General and administrative expenses


4,525



20,594



6,770



7,144



6,876Finance income


344



2,080



1,757



529



968Net loss before change in accounting principle

$
9,427


$
32,084


$
22,414


$
31,440


$
28,998Cumulative effect of change in accounting principle


(37
)














Net loss

$
9,390


$
32,084


$
22,414


$
31,440


$
28,998Net loss per share of common stock, basic and diluted(1)

$
0.32


$
0.48


$
0.30


$
0.41


$
0.36Weighted average number of shares of common stock used in
    computing net loss per share of common stock(2)


29,300,987



67,187,329



75,890,633



76,942,840



80,960,300Consolidated Balance Sheet Data:Cash and cash equivalents

$
15,378


$
61,813


$
42,596


$
81,266


$
35,900Other assets


11,610



6,324



8,215



17,405



28,829Total assets


26,988



68,137



50,811



98,671



64,729Current liabilities


2,268



3,762



5,527



21,530



18,903Total liabilities


2,704



4,452



6,464



82,788



76,052Shareholders equity (net of capital deficiency)


24,284



63,685



44,347



15,883



(11,323
)     *
    
    Represents less than $1.(1)
    
    Reflects the retroactive effects of the impact of our merger
    with Protalix Ltd. in December 2006 and the resulting exchange
    of shares of common stock for the ordinary shares of Protalix
    Ltd. at an exchange ratio of approximately 61.08 shares of
    our common stock per ordinary share of Protalix Ltd. for all
    periods presented.(2)
    
    In connection with the merger, we completed a
    one-for-ten
    reverse stock split in December 2006, therefore all share
    numbers presented in this Annual Report on
    Form 10-K
    give retroactive effect to the reverse stock split, as
    applicable. 61




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Item 7.
    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
    consolidated financial statements and the related notes included
    elsewhere in this Annual Report on
    Form 10-K.
    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 Item 1A of this Annual Report
    on
    Form 10-K
    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 discussion and analysis.
  Overview
  tm
         62




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63




---



##### Table of Contents



Critical
    Accounting Policies
      Functional
    Currency
    Revenues
         64




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##### Table of Contents



Research
    and Development Expense
    
    internal costs associated with research and development
    activities;
    payments made to third party contract research organizations,
    investigative sites and consultants;
    manufacturing development costs;
    personnel-related expenses, including salaries, benefits,
    travel, and related costs for the personnel involved in research
    and development;
    activities relating to the advancement of product candidates
    through preclinical studies and clinical trials; and
    facilities and other allocated expenses, which include direct
    and allocated expenses for rent and maintenance of facilities,
    as well as laboratory and other supplies.    Project

Status

Expected Near Term Milestonetaliglucerase alfa for the treatment of Gaucher disease

NDA and MAA (EMEA, ANVISA and the Israeli MOH) filed

PDUFA date (February 25, 2011)PRX 102  alpha-GAL-A

Preclinical

File IND and initiate phase I clinical trialsAcetylcholinesterase

Phase I clinical trial

Additional phase I clinical trialspr-antiTNF

Research

File IND and initiate phase I clinical trials        65




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Share-Based
    Compensation
               66




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Year
    Ended December 31, 2010 Compared to the Year Ended
    December 31, 2009
  Revenues
    Our share
    in the Collaboration Agreement
    Research
    and Development Expenses
      General
    and Administrative Expenses
   67




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##### Table of Contents



Financial
    Expenses and Income
    Year
    Ended December 31, 2009 Compared to the Year Ended
    December 31, 2008
  Revenues
    Research
    and Development Expenses
      General
    and Administrative Expenses
    Financial
    Expenses and Income
    Liquidity
    and Capital Resources
  Sources
    of Liquidity
   68




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##### Table of Contents



Number ofSecurity

Year

Shares

Amount(1)Ordinary Shares


1996-2000



18,801,527
(2)

$
1,100,000Series A Convertible Preferred Shares


2001



11,635,090


$
2,000,000Series B Convertible Preferred Shares(3)


2004-2005



7,175,621


$
4,500,000Series C Convertible Preferred Shares(4)


2005



5,513,422


$
7,700,000Ordinary Shares(5)


2006



10,367,880


$
16,000,000Common Stock


2007



10,000,000


$
50,000,000     (1)
    
    Gross proceeds; does not include proceeds from warrant exercises.(2)
    
    Includes the issuance of ordinary shares to founders.(3)
    
    During 2005, 1,035,569 Series B Preferred Shares were
    converted on a 1:1 basis into Series C Preferred Shares for
    no additional consideration. Also, in connection with such
    funding, warrants to purchase 181,228 Series B Preferred
    Shares were issued for no additional consideration with an
    aggregate exercise price of $103,000. As of the closing date of
    the merger, 168,034 of such warrants were exercised for net
    proceeds equal to approximately $96,000 and 13,194 of such
    warrants were forfeited.(4)
    
    In connection with such funding, warrants to purchase an
    additional 8,862,803 Series C Preferred Shares were granted
    to the investors for no additional consideration with a total
    exercise price equal to $9.0 million. As of the closing
    date of the merger, 5,296,279 of such warrants were exercised
    for net proceeds equal to $8.7 million, 3,384,502 were
    assumed by our company and 182,022 expired.(5)
    
    In connection with such funding, warrants to purchase 3,875,416
    ordinary shares were issued for no additional consideration with
    an aggregate exercise price equal to $5.3 million. These
    warrants were exercised in full on January 31, 2007.  Cash
    Flows
     69




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##### Table of Contents



Future
    Funding Requirements
          Effects
    of Inflation and Currency Fluctuations
     70




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##### Table of Contents



Off-Balance
    Sheet Arrangements
    Recently
    Issued Accounting Pronouncements
  No. 2010-17, Revenue Recognition  Milestone Method 2010-017). 2010-017 2010-017 2010-17
  No. 2010-027, 2010-027). 2010-027 2010-027
  Contractual
    Obligations
    Less Than








More ThanTotal


1 Year


1-3 Years


3-5 Years


5 YearsOperating lease obligations

$
5,293


$
1,360


$
2,265


$
1,668



Purchase obligations(1)

$
6,753


$
6,753











Certain clinical contract and building contractor obligations

$
5,995


$
5,456


$
539







Other long term liabilities reflected
    on the balance sheet under GAAP

$
1,663














$
1,663Total

$
19,704


$
13,569


$
2,804


$
1,668


$
1,663     (1)
    
    Represents open purchase orders issued to certain suppliers and
    other vendors mainly in connection with certain improvements to
    our manufacturing facility that were outstanding as of
    December 31, 2010. 71




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##### Table of Contents



Selected
    Quarterly Financial Data (unaudited)
  Three Months Ended2009

2010March 31

June 30

Sept. 30

Dec. 31

March 31

June 30

Sept. 30

Dec. 31(U.S. dollars in thousands)Revenues

$



$



$



$
388


$
1,141


$
1,141


$
3,184


$
1,176Net loss

$
5,183


$
5,427


$
5,894


$
14,936


$
7,955


$
10,041


$
2,474


$
8,528Net loss per share of common stock, basic and diluted

$
0.07


$
0.07


$
0.08


$
0.19


$
0.10


$
0.12


$
0.03


$
0.11   Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Currency
    Exchange Risk
      Year Ended December 31,2008

2009

2010Average rate for period


3.5878



3.933



3.733Rate at year-end


3.8020



3.775



3.549     Interest
    Rate Risk
    Item 8.
    Financial
    Statements and Supplementary Data  Page F-1
 72




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Form 10-K. Form 10-K,
  Form 10-K. Form 10-Q Form 10-K.
  Form 10-K,
  Management
    Report on Internal Control over Financial Reporting
     73




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##### Table of Contents



Inherent
    Limitations on Effectiveness of Controls
    Changes
    in internal controls
  Rules 13a-15f 15d-15f
  Item 9B.
    Other
    Information   74




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##### Table of Contents



PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance    Name

Age

PositionDirectorsZeev Bronfeld


59


Interim Chairman of the BoardDavid Aviezer, Ph.D., MBA


46


Director, President and Chief Executive OfficerYoseph Shaaltiel, Ph.D.


57


Director and Executive VP, Research and DevelopmentAlfred Akirov(1)(2)(3)


70


DirectorAmos Bar Shalev(1)(2)(3)


58


DirectorYodfat Harel Gross(1)(2)(3)


38


DirectorRoger D. Kornberg, Ph.D.


63


DirectorEyal Sheratzky


42


DirectorExecutive OfficersEinat Brill Almon, Ph.D.


51


Senior Vice President, Product DevelopmentYossi Maimon, CPA


40


Vice President, Chief Financial Officer, Treasurer and SecretarySandra L. Lauterbach


42


Vice President, Sales and Commercial AffairsTzvi Palash


54


Chief Operating Officer     (1)
    
    Member of Nominating Committee(2)
    
    Member of Audit Committee(3)
    
    Member of Compensation Committee  Zeev Bronfeld.
  David Aviezer, Ph.D.,
    MBA.
 75




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##### Table of Contents



Yoseph
    Shaaltiel, Ph.D.
  Alfred Akirov.
  Amos Bar Shalev.
  Yodfat Harel Gross.
 76




---



##### Table of Contents



Roger D. Kornberg, Ph.D.
  Eyal Sheratzky.
  Einat Brill Almon, Ph.D.
  Yossi Maimon, CPA.
 77




---



##### Table of Contents



Sandra L. Lauterbach.
  Tzvi Palash.
  Section 16(a)
    Beneficial Ownership Reporting Compliance
    Audit
    Committee
               78




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##### Table of Contents



Code of
    Business Conduct and Ethics
      Item 11.
    Executive
    Compensation  Compensation
    Discussion and Analysis
  build-up
  Elements
    of Compensation
    Base Salary.
  
    Keryx Biopharmaceuticals, Inc.
    Savient Pharmaceuticals, Inc.
    Biomarin Pharmaceutical Inc.
    Amicus Therapeutics, Inc.
    Mannkind Corporation
    Nektar Therapeutics
    Theravance, Inc.     79




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##### Table of Contents



Annual Bonus. build-up
       80




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##### Table of Contents



First
    shipment of taliglucerase alfa
  Anticipated BonusNamed Executive Officer

AmountDavid Aviezer, Ph.D., MBA


Yoseph Shaaltiel, Ph.D.

$
100,000Einat Brill Almon, Ph.D.

$
20,000Yossi Maimon

$
20,000Total

$
140,000   Approval
    of taliglucerase alfa by the FDA
  Anticipated BonusNamed Executive Officer

AmountDavid Aviezer, Ph.D., MBA

$
400,000Yoseph Shaaltiel, Ph.D.

$
140,000Einat Brill Almon, Ph.D.

$
140,000Yossi Maimon

$
140,000Total

$
820,000     Options.
  Severance and Change in Control
    Benefits.
  Other Compensation.
 81




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##### Table of Contents



Executive Compensation. Form 10-K
  Compensation
    Committee Report
  The above report of the Compensation Committee does not
    constitute soliciting material and shall not be deemed filed or
    incorporated by reference into any other filing by us under the
    Securities Act of 1933 or the Securities Exchange Act of
    1934.
          Summary
    Compensation Table
   82




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##### Table of Contents



NonqualifiedNon-Equity


DeferredName and










Stock


Option


Incentive Plan


Compensation


All OtherPrincipal




Salary


Bonus


Award(s)


Award(s)


Compensation


Earnings


Compensation


TotalPosition

Year


($)


($)


($)


($)


($)


($)


($)(1)


($)David Aviezer, Ph.D., MBA


2010



508,868











145,537











107,972



762,377President and


2009



427,970



500,000







529,951











62,167



1,520,088Chief Executive Officer


2008



486,305











565,394











93,224



1,144,923Yoseph Shaaltiel, Ph.D.


2010



292,095



100,000







70,286











76,491



538,872Executive Vice President,


2009



196,271



160,000







225,336











37,981



619,588Research and Development


2008



226,652











163,328











54,704



444,684Einat Brill Almon, Ph.D.


2010



251,940



20,000







97,007











66,591



435,538Senior Vice President,


2009



172,210



160,000







283,388











36,927



652,525Product Development


2008



195,559



28,932







253,862











51,223



529,576Yossi Maimon, CPA


2010



268,154



20,000







63,175











68,156



419,485Vice President,


2009



186,478



160,000







253,030











41,051



640,559Chief Financial Officer


2008



203,097



30,659







238,194











83,808



555,758Sandra L. Lauterbach(2)


2010



186,410











405,562











62,248



654,220Vice President, Sales and


2009































Commercial Affairs     (1)
    
    Includes employer contributions to pension and/or insurance
    plans and other miscellaneous payments.(2)
    
    Ms. Lauterbach joined our company in December 2009.    GRANTS OF
    PLAN-BASED AWARDS
  AllOtherAll


Option





GrantOther


Awards:


Exercise


Date FairStock


Number of


or Base


ValueEstimated Future Payouts Under


Estimated Future Payouts


Awards:


Securities


Price of


of StockNon-Equity Incentive Plan Awards


Under Equity Incentive Plan Awards


Number of


Underlying


Option


and OptionGrant


Threshold


Target














Shares of


Options


Awards


AwardsName

Date


($)


($)


Maximum($)


Threshold($)


Target($)


Maximum($)


Stock or Units (#)


(#) (1)


($/Sh) (2)


($)(3)(a)

(b)


(c)


(d)


(e)


(f)


(g)


(h)


(i)


(j)


(k)


(l)David Aviezer


Feb. 25, 2010































250,000



6.90



1,395,820Yoseph Shaaltiel


Feb. 25, 2010































145,000



6.90



809,576Einat Brill Almon


Feb. 25, 2010































130,000



6.90



725,826Yossi Maimon


Feb. 25, 2010































130,000



6.90



725,826Sandra L. Lauterbach


Feb. 7, 2010































160,000



6.81



739,623     (1)
    
    Represents outstanding options at December 31, 2010.(2)
    
    Represents the range of the exercise price of the stock options.(3)
    
    Represents the fair value as recorded on the grant date of the
    stock options. 83




---



##### Table of Contents



Outstanding
    Equity Awards at Fiscal Year-End
    Option Awards


Stock AwardsEquityIncentivePlanEquity


Awards:Incentive


Market orEquity














Plan


PayoutIncentive














Awards:


Value ofPlan














Number of


UnearnedAwards:











Market


Unearned


Shares,Number


Number


Number








Number


Value of


Shares,


Units orof Securities


of Securities


of Securities








of Shares or


Shares


Units or


OtherUnderlying


Underlying


Underlying








Units


or Units


Other


RightsUnexercised


Unexercised


Unexercised


Option





of Stock


of Stock


Rights


ThatOptions


Options


Unearned


Exercise


Option


That Have


That Have


That Have


Have NotExercisable


Unexercisable


Options


Price


Expiration


Not Vested


Not Vested


Not Vested


VestedName

(#)


(#)


(#)


($)


Date


(#)


($)


(#)


($)David Aviezer


326,267











0.120



8/1/2013















977,297











0.972



9/10/2016















399,996



200,004







5.00



2/7/2018















100,000











2.65



2/25/2019















250,000







6.90



2/25/2020Yoseph Shaaltiel


122,162
(1)










0.001



6/30/2016















175,816



87,912







5.00



2/7/2018















50,000











2.65



2/25/2019















145,000







6.90



2/25/2020Einat Brill Almon


116,848











0.972



8/13/2016















207,520



103,752







5.00



2/7/2018















50,000











2.65



2/25/2019















130,000







6.90



2/25/2020















Yossi Maimon


75,964











0.972



9/19/2016















116,668



58,332







5.00



2/7/2018















50,000











2.65



2/25/2019















130,000







6.90



2/25/2020Sandra L. Lauterbach






160,000







6.81



2/7/2020     (1)
    
    Pursuant to a divorce settlement, Dr. Shaaltiel is required
    to transfer 50% of these options to his former spouse.    OPTION
    EXERCISES AND STOCK VESTED
  Option Awards


Stock AwardsNumber of





Number ofShares


Value


Shares


ValueAcquired on


Received on


Acquired on


Received onExercise


Exercise


Vesting


VestingName (a)

(#)(b)


($)(c)


(#)(d)


($)(e)David Aviezer














Yoseph ShaaltielYossi Maimon(1)


140,000



68,040







Einat Brill Almon


120,000



113,919







Sandra L. Lauterbach














     (1)
    
    Some of the options were exercised through net exercise with no
    value received by our company in connection with the exercise. 84




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##### Table of Contents



Potential
    Payments upon Termination or
    Change-in-Control
    Employment
    Arrangements
  David Aviezer, Ph.D.,
    MBA.
  Yoseph
    Shaaltiel, Ph.D.
 85




---



##### Table of Contents



Einat Brill Almon, Ph.D.
  Yossi Maimon, CPA.
  Sandra L. Lauterbach.
 86




---



##### Table of Contents



2006
    Stock Incentive Plan
             87




---



##### Table of Contents




    a merger or consolidation in which we are not the surviving
    entity, except for the principal purpose of changing our
    companys state of incorporation;
    the sale, transfer or other disposition of all or substantially
    all of our assets;
    the complete liquidation or dissolution of our company;
    any reverse merger in which we are the surviving entity but our
    shares of common stock outstanding immediately prior to such
    merger are converted or exchanged by virtue of the merger into
    other property, whether in the form of securities, cash or
    otherwise, or in which securities possessing more than forty
    percent (40%) of the total combined voting power of our
    outstanding securities are transferred to a person or persons
    different from those who held such securities immediately prior
    to such merger; or
    acquisition in a single or series of related transactions by any
    person or related group of persons of beneficial ownership of
    securities possessing more than fifty percent (50%) of the total
    combined voting power of our outstanding securities but
    excluding any such transaction or series of related transactions
    that the plan administrator determines not to be a corporate
    transaction (provided however that the plan administrator shall
    have no discretion in connection with a corporate transaction
    for the purchase of all or substantially all of our shares
    unless the principal purpose of such transaction is changing our
    companys state of incorporation).    
    the direct or indirect acquisition by any person or related
    group of persons of beneficial ownership of securities
    possessing more than fifty percent (50%) of the total combined
    voting power of our outstanding securities pursuant to a tender
    or exchange offer made directly to our shareholders and 88




---



##### Table of Contents



which a majority of the members of our board (who have generally
    been on our board for at least 12 months) who are not
    affiliates or associates of the offeror do not recommend
    shareholders accept the offer; or  
    a change in the composition of our board over a period of
    12 months or less, such that a majority of our board
    members ceases, by reason of one or more contested elections for
    board membership, to be comprised of individuals who were
    previously directors of our company.  non-U.S. jurisdiction
  Impact
    of Israeli Tax Law
           89




---



##### Table of Contents



Compensation
    of Directors
    Fees





Non-Equity

NonqualifiedEarned





Incentive

Deferred

Allor Paid

Stock

Option

Plan

Compensation

Otherin Cash

Award

Awards

Compensation

Earnings

Compensation

TotalName

($)

($)

($)

($)

($)

($)

($)Current DirectorsEli Hurvitz(1)


6,297























6,297Alfred Akirov


33,000























33,000Amos Bar Shalev


50,000























50,000Zeev Bronfeld


33,000























33,000Yodfat Harel Gross


33,000























33,000Roger D. Kornberg


33,000























33,000Eyal Sheratzky


33,000























33,000     (1)
    
    Represents amounts paid to Pontifax Management Company, Ltd.
    pursuant to a management consulting agreement. Mr. Hurvitz
    resigned from our Board of Directors in March 2010.    Compensation
    Committee Interlocks and Insider Participation
    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Security
    Ownership of Certain Beneficial Owners and Management
    
    each person who is known by us to own beneficially more than 5%
    of our common stock;
    each director;
    each of our Chief Executive Officer, our Executive Vice
    President, Research and Development, our Senior Vice President, Product
    Development, our Chief Financial Officer, our Vice President,
    Sales and Commercial Affairs and our Chief Operating
    Officer; and
    all of our directors and executive officers collectively.   90




---



##### Table of Contents



c/o Protalix
  Amount and Natureof Beneficial

Percentage ofName and Address of Beneficial Owner

Ownership

ClassBoard of Directors and Executive OfficersDavid Aviezer, Ph.D., MBA(1)


1,836,895



2.3
%Yoseph Shaaltiel, Ph.D.(2)


1,076,384



1.3Alfred Akirov(3)


6,186,046



7.6Amos Bar Shalev(4)


1,680



*Zeev Bronfeld(5)


14,466,319



17.8Yodfat Harel Gross






Roger D. Kornberg, Ph.D.(6)


37,500



*Eyal Sheratzky






Einat Brill Almon, Ph.D.(7)


391,660



*Yossi Maimon(8)


252,353



*Sandra E. Lauterbach(9)






Tzvi Palash(10)






All executive officers and directors as a group
    (12 persons)(11) 5% Holders


24,248,837



29.8Biocell Ltd.(12)


14,466,319



17.8Techno-Rov Holdings (1993) Ltd.(13)


6,186,046



7.6Baillie Gifford & Co.(14)


5,828,161



7.2     *
    
    less than 1%.(1)
    
    Consists of 1,836,895 shares of our common stock issuable
    upon exercise of outstanding options within 60 days of
    February 15, 2011. Does not include 416,669 shares of
    common stock issuable upon exercise of outstanding options that
    are not exercisable within 60 days of February 15,
    2011.(2)
    
    Consists of 763,754 shares of our common stock held by
    Dr. Shaaltiel and 312,630 shares of our common stock
    issuable upon exercise of outstanding options within
    60 days of February 15, 2011. Does not include
    268,260 shares of common stock issuable upon exercise of
    outstanding options that are not exercisable within 60 days
    of February 15, 2011.(3)
    
    Consists of 6,186,046 shares of our common stock held by
    Techno-Rov Holdings (1993) Ltd. Mr. Akirov is the
    Chief Executive Officer of Techno-Rov Holdings and has the power
    to control its investment decisions.(4)
    
    Mr. Bar Shalev is the Manager of Techno-Rov Holdings.(5)
    
    Consists of 14,466,319 shares of our common stock held by
    Biocell Ltd. Mr. Bronfeld is a director and Chief Executive
    Officer of Biocell. Mr. Bronfeld disclaims beneficial
    ownership of these shares except to the extent of his pecuniary
    interest therein.(6)
    
    Consists of 37,500 shares of our common stock issuable upon
    exercise of outstanding options within 60 days of
    February 15, 2011. Does not include 12,500 shares of
    common stock issuable upon exercise of outstanding options that
    are not exercisable within 60 days of February 15,
    2011. 91




---



##### Table of Contents



(7)
    
    Consists of 391,660 shares of our common stock issuable
    upon exercise of outstanding options within 60 days of
    February 15, 2011. Does not include 216,460 shares of
    common stock issuable upon exercise of outstanding options that
    are not exercisable within 60 days of February 15,
    2011.(8)
    
    Consists of 252,353 shares of our common stock issuable
    upon exercise of outstanding options within 60 days of
    February 15, 2011. Does not include 178,611 shares of
    common stock issuable upon exercise of outstanding options that
    are not exercisable within 60 days of February 15,
    2011.(9)
    
    Does not include 160,000 shares of common stock issuable
    upon exercise of outstanding options that are not exercisable
    within 60 days of February 15, 2011.(10)
    
    Does not include 160,000 shares of common stock issuable
    upon exercise of outstanding options that are not exercisable
    within 60 days of February 15, 2011.(11)
    
    Consists of 21,417,799 shares of our common stock and
    2,831,038 shares of our common stock issuable upon exercise
    of outstanding options within 60 days of February 15,
    2011. Does not include 1,412,500 shares of common stock
    issuable upon exercise of outstanding options that are not
    exercisable within 60 days of February 15, 2011.(12)
    
    The address is Moshe Aviv Tower, 7 Jabotinsky Street, Ramat Gan,
    Israel. Biocell Ltd.s investment and voting decisions are
    made collectively by its board of directors.(13)
    
    The address is Alrov Tower, 46 Rothschild Blvd., Tel Aviv,
    Israel 66883. Mr. Akirov is the Chief Executive Officer of
    Techno-Rov Holdings (1993) Ltd. and has the power to
    control its investment decisions.(14)
    
    Based solely on a Schedule 13G filed by Baillie
    Gifford & Co. on January 25, 2011. According to
    Baillie Gifford & Co., it has sole dispositive power
    over 5,828,161 shares of common stock and sole voting power
    over 3,369,061 shares of common stock.  Equity
    Compensation Plan Information
    A

B

CNumber ofSecuritiesRemainingAvailable forFuture IssuanceNumber of

Weighted

Under EquitySecurities to be

Average

CompensationIssued

Exercise

Plans (ExcludingUpon Exercise of

Price of

SecuritiesOutstanding

Outstanding

Reflected inPlan Category

Options

Options

Column A)Equity Compensation Plans Approved by Shareholders


7,174,805


$
3.16



3,064Equity Compensation Plans Not Approved by Shareholders


631,866


$
10.24



Total


7,806,671


$
3.73



3,064   Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence   92




---



##### Table of Contents



tm
    Corporate
    Governance and Independent Directors
    Independent
    Directors
    
    Whether the member of the Board of Directors has any material
    relationship with us, either directly, or as a partner,
    shareholder or officer of an organization that has a
    relationship with us;
    Whether the member of the Board of Directors is a current
    employee of our company or any of our subsidiaries, or was an
    employee of our company or any of our subsidiaries within three
    years preceding the date of determination;
    Whether the member of the Board of Directors is, or in the three
    years preceding the date of determination has been, affiliated
    with or employed by (i) a present internal or external
    auditor of our company or any affiliate of such auditor or
    (ii) any former internal or external auditor of our company
    or any affiliate of such auditor, which performed services for
    us within three years preceding the date of determination;
    Whether the member of the Board of Directors is, or in the three
    years preceding the date of determination has been, part of an
    interlocking directorate, in which any of our executive officers
    serve on the Compensation Committee of another company that
    concurrently employs the member as an executive officer; 93




---



##### Table of Contents




    Whether the member of the Board of Directors receives any
    compensation from us, other than fees or compensation for
    service as a member of the Board of Directors and any committee
    of the Board of Directors and reimbursement for reasonable
    expenses incurred in connection with such service and for
    reasonable educational expenses associated with Board of
    Directors or committee membership matters;
    Whether an immediate family member of the member of the Board of
    Directors is a current executive officer of our company or was
    an executive officer of our company within three years preceding
    the date of determination;
    Whether an immediate family member of the member of the Board of
    Directors is, or in the three years preceding the date of
    determination has been, affiliated with or employed in a
    professional capacity by (i) a present internal or external
    auditor of ours or any of our affiliates or (ii) any former
    internal or external auditor of our company or any affiliate of
    ours which performed services for us within three years
    preceding the date of determination; and
    Whether an immediate family member of the member of the Board of
    Directors is, or in the three years preceding the date of
    determination has been, part of an interlocking directorate, in
    which any of our executive officers serve on the Compensation
    Committee of another company that concurrently employs the
    immediate family member of the member of the Board of Directors
    as an executive officer.        The
    Boards Role in Risk Oversight
   94




---



##### Table of Contents



Item 14.
    Principal
    Accountant Fees and Services    Year Ended December 31,2010

2009Audit Fees

$
289,740


$
259,000Audit Related Fees

$
28,353


$
78,039Tax Fees

$
63,008


$
197,282All Other Fees

$



$
   Policy on
    Audit Committee Pre-Approval of Audit and Permissible Non-Audit
    Services of Independent Auditors
   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  Form 10-K:
  Financial Statements Form 10-K:
  PageReport of Independent Registered Public
    Accounting Firm


F-2Consolidated Balance Sheets as of
    December 31, 2009, and 2010


F-3Consolidated Statements of Operations for the
    years ended December 31, 2008, 2009, and 2010


F-4Consolidated Statements of Changes in
    Shareholders Equity (Capital Deficiency) for the years
    ended December 31, 2008, 2009, and 2010


F-5Consolidated Statements of Cash Flows for the
    years ended December 31, 2008, 2009, and 2010


F-6Notes to Consolidated Financial Statements


F-7   Financial Statement Schedule.
 95




---



##### Table of Contents



Exhibits.
  Incorporated by ReferenceExhibit





File





FiledNumber

Exhibit Description

Form

Number

Exhibit

Date

Herewith3
.1

Amended and Restated Articles of Incorporation of the Company

S-4

333-48677


3
.4

March 26, 19983
.2

Article of Amendment to Articles of Incorporation dated
    June 9, 2006

8-A

001-33357


3
.2

March 9, 20073
.3

Article of Amendment to Articles of Incorporation dated
    December 13, 2006

8-A

001-33357


3
.3

March 9, 20073
.4

Article of Amendment to Articles of Incorporation dated
    December 26, 2006

8-A

001-33357


3
.4

March 9, 20073
.5

Article of Amendment to Articles of Incorporation dated
    February 26, 2007

8-A

001-33357


3
.5

March 9, 20073
.6

Amended and Restated Bylaws of the Company

10-Q

001-33357


3
.6

August 8, 200810
.1

2006 Stock Incentive Plan

10-K

001-33357


10
.1

July 13, 200710
.2

Employment Agreement between Protalix Ltd. and Yoseph Shaaltiel,
    dated as of September 1, 2004

8-K

001-33357


10
.3

January 8, 200710
.3

Employment Agreement between Protalix Ltd. and Einat Almon,
    dated as of December 19, 2004

8-K

001-33357


10
.3

January 8, 200710
.4

Employment Agreement between Protalix Ltd. and David Aviezer,
    dated as of September 11, 2006

8-K

001-33357


10
.4

January 8, 200710
.5

Employment Agreement between Protalix Ltd. and Yossi Maimon,
    dated as of October 15, 2006

8-K

001-33357


10
.5

January 8, 200710
.6

License Agreement entered into as of April 12, 2005, by and
    between Icon Genetics AG and Protalix Ltd.

8-K/A

001-33357


10
.6

September 20, 200710
.7

Research and License Agreement between Yeda Research and
    Development Company Limited and Protalix Ltd. dated as of
    March 15, 2006

8-K/A

001-33357


10
.7

September 20, 200710
.8

Agreement between Teva Pharmaceutical Industries Ltd. and
    Protalix Ltd., dated September 14, 2006

8-K/A

001-33357


10
.8

September 20, 200710
.9

Lease Agreement between Protalix Ltd. and Angel Science Park
    (99) Ltd., dated as of October 28, 2003 as amended on
    April 18, 2005

8-K

001-33357


10
.9

January 8, 200710
.10

Merger Agreement and Plan of Reorganization made and entered
    into as of August 21, 2006, by and among the Company,
    Protalix Acquisition Co., Ltd. and Protalix Ltd.

8-K

001-33357


10
.10

January 8, 200710
.11

Stock Option Award Agreement grant by and between the Company
    and Steven Rubin, dated as of December 31, 2006

10-K

001-33357


10
.13

March 30, 2007 96




---



##### Table of Contents



Incorporated by ReferenceExhibit





File





FiledNumber

Exhibit Description

Form

Number

Exhibit

Date

Herewith10
.12

First Amendment to the December 31, 2006 Stock Option Award
    Agreement by and between the Company and Steven Rubin, effective
    as of February 28, 2007

10-K

001-33357


10
.16

March 30, 200710
.13

Scientific Advisory Board Agreement dated August 5, 2007 by
    and between the Company and Aaron Ciechanover, M.D.

8-K

001-33357


10
.1

August 6, 200710
.14

Research and License Agreement made on August 8, 2007, by
    and between Yissum Research Development Company of Jerusalem,
    the Boyce Thompson Institute and Protalix Ltd.

10-Q

001-33357


10
.1

November 14, 200710
.15

Unprotected Lease Agreement

10-K

001-33357


10
.21

March 17, 200810
.16

Exclusive License and Supply Agreement dated as of
    November 30, 2009 between Protalix Ltd. and Pfizer Inc.

10-K

001-33357


10
.16

February 26, 201010
.17

Employment Agreement by and between the Company and Sandra
    Lauterbach dated as of December 17, 2009

8-K

001-33357


10
.1

December 27, 200910
.18

Employment Agreement by and between Protalix Ltd., and Tzvi
    Palash dated as of August 29, 2010

8-K

001-33357


10
.1

September 7, 201010
.19

License Agreement between Protalix Biotherapeutics Ltd. and
    Virginia Tech Intellectual Properties, Inc.

10-Q

001-33357


10
.2

November 8, 201021
.1

Subsidiaries

10-K

001-33357


21
.1

February 26, 201023
.1

Consent of Kesselman & Kesselman, Certified Public
    Accountant (Isr.), A member of PricewaterhouseCoopers
    International Limited, independent registered public accounting
    firm for the Registrant











X31
.1

Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a)
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002











X31
.2

Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a)
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002











X32
.1

18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002,
    Certification of Chief Executive Officer











X32
.2

18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002,
    Certification of Chief Financial Officer











X     
    
    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. 97




---



##### Table of Contents



SIGNATURES      By:
    /s/  David
    Aviezer    POWER OF
    ATTORNEY
  Form 10-K,
    Signature

Title

Date/s/  David
    AviezerDavid
    Aviezer, Ph.D.

President, Chief Executive Officer (Principal Executive Officer)
    and Director

February 23, 2011/s/  Yossi
    MaimonYossi
    Maimon

Chief Financial Officer, Treasurer and
    Secretary (Principal Financial and Accounting Officer)

February 23, 2011/s/  Yoseph
    ShaaltielYoseph
    Shaaltiel, Ph.D.

Executive VP, Research and Development and Director

February 23, 2011/s/  Alfred
    AkirovAlfred
    Akirov

Director

February 23, 2011/s/  Amos
    Bar ShalevAmos
    Bar Shalev

Director

February 23, 2011/s/  Zeev
    BronfeldZeev
    Bronfeld

Director

February 23, 2011 98




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##### Table of Contents



Signature

Title

Date/s/  Yodfat
    Harel GrossYodfat
    Harel Gross

Director

February 23, 2011/s/  Eyal
    SheratzkyEyal
    Sheratzky

Director

February 23, 2011  99




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  CONSOLIDATED
    FINANCIAL STATEMENTS
  TABLE OF
    CONTENTS
  PageREPORT OF INDEPENDENT REGISTERED PUBLIC
    ACCOUNTING FIRM


F-2CONSOLIDATED FINANCIAL STATEMENTSConsolidated Balance Sheets as of
    December 31, 2009, and 2010


F-3Consolidated Statements of Operations for the
    years ended December 31, 2008, 2009, and 2010


F-4Consolidated Statements of Changes in
    Shareholders Equity (Capital Deficiency) for the years
    ended December 31, 2008, 2009, and 2010


F-5Consolidated Statements of Cash Flows for the
    years ended December 31, 2008, 2009, and 2010


F-6Notes to Consolidated Financial Statements


F-7    F-1




---



##### Table of Contents



(IMAGE)






REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM    PROTALIX BIOTHERAPEUTICS, INC.
        Tel-Aviv, Israel

/s/  Kesselman
    & KesselmanFebruary 23, 2011

Kesselman & KesselmanCertified Public Accountant (Isr.)A member firm of PricewaterhouseCoopersInternational Limited  Kesselman
& Kesselman, Trade Tower, 25 Hamered Street, Tel-Aviv 68125, Israel, P.O. Box
452 Tel-Aviv 61003 Telephone: +972 -3- 7954555, Fax:+972 -3- 7954556, www.pwc.co.il
  F-2




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  CONSOLIDATED BALANCE SHEETS
  December 31,2009


2010(U.S. dollars in thousands, except shares and per share
    amounts)ASSETSCURRENT ASSETS:Cash and cash equivalents

$
81,266


$
35,900Accounts receivable:Trade






7,013Other


2,144



2,231Inventories






1,189Total current assets


83,410



46,333FUNDS IN RESPECT OF EMPLOYEE RIGHTS UPON RETIREMENT


724



942PROPERTY AND EQUIPMENT, NET


14,537



17,454Total assets

$
98,671


$
64,729LIABILITIES AND SHAREHOLDERS EQUITY (NET OF CAPITAL
    DEFICIENCY)CURRENT LIABILITIES:Accounts payable and accruals:Trade

$
3,406


$
6,272Other


13,561



8,068Deferred revenues


4,563



4,563Total current liabilities


21,530



18,903LONG TERM LIABILITIES:Deferred revenues


60,049



55,486Liability for employee rights upon retirement


1,209



1,663Total long term liabilities


61,258



57,149Total liabilities


82,788



76,052COMMITMENTSSHAREHOLDERS EQUITY (CAPITAL DEFICIENCY):Common Stock, $0.001 par value:Authorized  as of December 31, 2009 and 2010,
    150,000,000 shares; issued and outstanding  as
    of December 31, 2009 and 2010, 80,841,237 and
    81,248,472 shares, respectively


81



81Additional paid-in capital


122,252



124,044Accumulated deficit


(106,450
)


(135,448
)Total shareholders equity (capital deficiency)


15,883



(11,323
)Total liabilities and shareholders equity (net of capital
    deficiency)

$
98,671


$
64,729    F-3




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  CONSOLIDATED STATEMENTS OF
    OPERATIONS
  Year Ended December 31,2008


2009


2010(U.S. dollars in thousands,except shares and per share amounts)REVENUES

$



$
388


$
6,642COMPANYS SHARE IN COLLABORATION AGREEMENT










4,602COST OF REVENUES






(3,575
)


(4,383
)GROSS PROFIT (LOSS)






(3,187
)


6,861RESEARCH AND DEVELOPMENT EXPENSES


(22,115
)


(27,390
)


(37,691
)Less  grants and reimbursements


4,714



5,752



7,740(17,401
)


(21,638
)


(29,951
)GENERAL AND ADMINISTRATIVE EXPENSES


(6,770
)


(7,144
)


(6,876
)OPERATING LOSS


(24,171
)


(31,969
)


(29,966
)FINANCIAL INCOME  NET


1,757



529



968NET LOSS FOR THE YEAR

$
(22,414
)

$
(31,440
)

$
(28,998
)Net loss per share of common stock  basic and diluted:

$
0.30


$
0.41


$
0.36Weighted average number of shares of common stock used in
    computing loss per share of common stock, basic and diluted:


75,890,633



76,942,840



80,960,300    F-4




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  CONSOLIDATED STATEMENT OF CHANGES IN
    SHAREHOLDERS EQUITY
 (CAPITAL
    DEFICIENCY)
  AdditionalCommon


Common


Paid in


AccumulatedStock


Stock


Capital


Deficit


TotalNumber ofShares


Amount(U.S. dollars in thousands, except share data)Balance at January 1, 2008


75,775,439



76



116,205



(52,596
)


63,685Changes during 2008:Restricted Common Stock issued for future services(1)


(5,333
)



*


(3
)






(3
)Share-based compensation










3,074







3,074Exercise of options granted to employees (includes net exercise)


167,953




*


5







5Net Loss














(22,414
)


(22,414
)Balance at December 31, 2008


75,938,059



76



119,281



(75,010
)


44,347Changes during 2009:Share-based compensation










2,683







2,683Exercise of options granted to employees and non-employees
    (includes net exercise)


4,903,178



5



288







293Net Loss














(31,440
)


(31,440
)Balance at December 31, 2009


80,841,237



81



122,252



(106,450
)


15,883Changes during 2010:Share-based compensation










1,282







1,282Exercise of options granted to employees and non-employees
    (includes net exercise)


407,235




*


510







510Net Loss














(28,998
)


(28,998
)Balance at December 31, 2010


81,248,472



81



124,044



(135,448
)


(11,323
)     *
    
    Represents an amount less than $1.(1)
    
    The Company issued a total of 8,000 shares of restricted
    Common Stock in consideration for services provided by, and to
    be provided by, a member of the Companys Scientific
    Advisory Board. Such services were terminated in October 2008
    while the forfeiture provisions of the restricted stock were
    still in effect. Accordingly, 5,333 shares of restricted
    Common Stock were forfeited.   F-5




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  CONSOLIDATED STATEMENTS OF CASH
    FLOWS
  Year Ended December 31,2008


2009


2010(U.S. dollars in thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net Loss

$
(22,414
)

$
(31,440
)

$
(28,998
)Adjustments required to reconcile net loss to net cashprovided by (used in) operating activities:Share based compensation


3,071



2,683



1,282Depreciation and impairment of fixed assets


1,301



1,990



3,133Financial income net (mainly exchange differences)


(270
)


(166
)


(591
)Changes in accrued liability for employee rights upon retirement


247



265



377Loss (Gain) on amounts funded in respect of employee rights upon
    retirement


39



(81
)


(26
)Loss on sale of fixed assets






29Changes in operating assets and liabilities:Increase (decrease) in deferred revenues (including non-current
    portion)






64,612



(4,563
)Decrease (increase) in accounts receivable


636



(1,224
)


(6,860
)Increase in inventories










(1,189
)Increase (decrease) in accounts payable and accruals


1,375



7,784



(1,029
)Net cash provided by (used in) operating activities

$
(16,015
)

$
44,452


$
(38,464
)CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment

$
(3,371
)

$
(6,195
)

$
(7,855
)Investment in restricted deposit


(175
)Proceeds from sale of property and equipment


1



73Amounts funded in respect of employee rights upon retirement, net


(156
)


(52
)


(137
)Net cash used in investing activities

$
(3,701
)

$
(6,174
)

$
(7,992
)CASH FLOWS FROM FINANCING ACTIVITIES:Issuance cost in respect of issuance of shares

$
(56
)Exercise of options


5


$
293


$
501Net cash provided by (used in) financing activities

$
(51
)

$
293


$
501EFFECT OF EXCHANGE RATE CHANGES ON CASH


550



99



589NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


(19,217
)


38,670



(45,366
)BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR


61,813



42,596



81,266BALANCE OF CASH AND CASH EQUIVALENTS AT END OF YEAR

$
42,596


$
81,266


$
35,900SUPPLEMENTARY INFORMATION ON INVESTING AND FINANCING
    ACTIVITIES NOT INVOLVING CASH FLOWS:Purchase of property and equipment

$
932


$
4,525


$
2,720Exercise of options granted to employees









$
9    F-6




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (U.S. dollars in thousands)
  NOTE 1 
    SIGNIFICANT
    ACCOUNTING POLICIES  a.
    General  1.
    Operation  tm
            2.
    Liquidity
    and Financial Resources   F-7




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS
(U.S. dollars in thousands)
  NOTE 1 
    SIGNIFICANT
    ACCOUNTING POLICIES (continued):      b.
    Basis
    of presentation    c.
    Use of
    estimates in the preparation of financial
    statements    d.
    Functional
    currency      e.
    Cash
    equivalents    f.
    Inventories   F-8




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS
(U.S. dollars in thousands)
  NOTE 1 
    SIGNIFICANT
    ACCOUNTING POLICIES (continued):      g.
    Property
    and equipment      YearsLaboratory equipment

5Furniture

10-15Computer equipment

3     h.
    Impairment
    in value of long-lived assets:    i.
    Income
    taxes  1.
    Deferred
    income taxes      2.
    Uncertainty
    in income taxes   F-9




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS
(U.S. dollars in thousands)
  NOTE 1 
    SIGNIFICANT
    ACCOUNTING POLICIES (continued):  j.
    Revenue
    Recognition    1.
    Revenues
    from the license and supply agreement with Pfizer    2.
    Revenues
    from selling products to Pfizer    3.
    Companys
    share in the collaboration agreement    k.
    Research
    and development costs     F-10




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS(U.S. dollars in thousands)
  NOTE 1 
    SIGNIFICANT
    ACCOUNTING POLICIES (continued):        l.
    Comprehensive
    loss    m.
    Concentration
    of credit risks and trade receivable      n.
    Share-based
    compensation        o.
    Net
    Loss per share     F-11




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS(U.S. dollars in thousands)
  NOTE 1 
    SIGNIFICANT
    ACCOUNTING POLICIES (continued):    p.
    Newly
    Issued Accounting Pronouncements  No. 2009-13, 2009-13). 2009-13 2009-13, 2009-13. 2009-13
  No. 2010-17, 2010-17). 2010-17 2010-17 2010-17
  NOTE 2 
    LICENSE
    AND SUPPLY AGREEMENT       F-12




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS(U.S. dollars in thousands)
  NOTE 2 
    LICENSE
AND SUPPLY AGREEMENT (continued):      NOTE 3 
    PROPERTY
    AND EQUIPMENT    December 31,2009


2010Laboratory equipment

$
10,008


$
11,478Furniture and computer equipment


944



1,306Leasehold improvements


5,665



11,221Equipment under construction


2,615



1,038$
19,232


$
25,043Less  accumulated depreciationand amortization


(4,695
)


(7,589
)$
14,537


$
17,454       NOTE 4 
    INVENTORIES    December 31, 2010Raw materials

$
553Finished goods


636Total inventory

$
1,189     NOTE 5 
    LIABILITY
    FOR EMPLOYEE RIGHTS UPON RETIREMENT     F-13




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS(U.S. dollars in thousands)
  NOTE 5 
    LIABILITY
    FOR EMPLOYEE RIGHTS UPON RETIREMENT (continued):          10-year
  NOTE 6 
    COMMITMENTS  a.
    Royalty
    commitments         F-14




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS(U.S. dollars in thousands)
  NOTE 6 
    COMMITMENTS
(continued):    ,
      b.
    Subcontracting
    Agreements  sub-contracting
  c.
    Lease
    Agreements    d.
    Vehicle
    Lease and Maintenance Agreements   F-15




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS
(U.S. dollars in thousands)
  NOTE 6 
    COMMITMENTS
(continued):  e.
    Teva
    Agreement    f.
    Yissum
    Agreement    NOTE 7 
    SHARE
    CAPITAL  a.
    Rights
    of the Companys Stock  1.
    Common
    Stock    2.
    Preferred
    Shares    b.
    Stock
    based compensation   F-16




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS(U.S. dollars in thousands)
  NOTE 7 
    SHARE
    CAPITAL (continued):          1.
    Options
    granted to employees:    Year of

No. of Options


Exercise Price




Fair Value


ExpirationGrant

Granted


Range


Vesting Period

at Grant


Period2008


2,060,000


$
2.35-$5.00


4 -5 years

$
2,914


10 years2009*


504,000


$
2.65


Upon achievement of 
    certain milestones*

$
1,068


10 years2009


120,400


$
2.65


4 years

$
212


10 years2010


1,016,000


$
6.90


3 years commencing 
    upon achievement of a
    certain milestone

$
5,673


10 years2010


428,000


$
6.32-$9.66


4 years

$
2,147


10 years4,128,400     *
    
    The milestone was achieved as of December 31, 2009 and the
    options vested in full.         F-17




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS(U.S. dollars in thousands)
  NOTE 7 
    SHARE
    CAPITAL (continued):                 F-18




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS(U.S. dollars in thousands)
  NOTE 7 
    SHARE
    CAPITAL (continued):    2008


2009


2010Dividend yield


0%



0%



0%Expected volatility


63%



75%



75%Risk-free interest rate


2.99%



2.74%



3.23%Expected life  in years


6.0



9.2



8.8           2.
    Options
    and shares of restricted Common Stock granted to consultants,
    directors, and other service providers:      2008Dividend yield


0%Expected volatility


63%Risk-free interest rate


2.99%Expected life  in years


10  F-19




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS
(U.S. dollars in thousands)
  NOTE 7 
    SHARE
    CAPITAL (continued):            1.
    Options
    granted to employees:  Year Ended December 31,2008


2009


2010Weighted





Weighted





WeightedNumber


Average


Number


Average


Number


Averageof


Exercise


of


Exercise


of


ExerciseOptions


Price


Options


Price


Options


PriceOutstanding at beginning of year


4,212,686


$
0.830



5,890,641


$
2.118



5,366,729


$
2.476Changes during the year:Granted


2,060,000



4.794



624,400



2.650



1,444,000



7.076Forfeited


177,237



4.405



1,400



2.650



13,441



3.551Exercised(*)


204,808



0.565



1,146,912



0.733



429,309



1.602Outstanding at end of year


5,890,641


$
2.118



5,366,729


$
2.476



6,367,979


$
3.576Exercisable at end of year


3,267,607


$
0.995



3,680,382


$
1.785



4,267,850


$
2.183     (*)
    The total intrinsic value of options exercised during the years
    ended December 31, 2008, 2009 and 2010, was $450, $7,258
    and $3,050, respectively. F-20




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS(U.S. dollars in thousands)
  NOTE 7 
    SHARE
    CAPITAL (continued):  2.
    Options
    granted to consultants, directors, and other service
    providers:  Year Ended December 31,2008


2009


2010Weighted





Weighted





WeightedNumber


Average


Number


Average


Number


Averageof


Exercise


of


Exercise


of


ExerciseOptions


Price


Options


Price


Options


PriceOutstanding at beginning of year


5,254,785


$
1.250



5,304,785


$
1.285



1,438,692


$
4.697Changes during the year:Granted


50,000



3.020Exercised(*)










3,866,093



0.016Outstanding at end of year


5,304,785


$
1.285



1,438,692


$
4.697



1,438,692


$
4.697Exercisable at end of year


5,133,189


$
0.902



1,407,234


$
4.674



1,421,734


$
4.653     (*)
    
    The total intrinsic value of options exercised during the years
    ended December 31, 2008, 2009 and 2010, was $0, $41,281 and
    $0, respectively.    December 31, 2010Options Outstanding


Options ExercisableNumber of


Weighted


Number of


WeightedOptions


Average


Options


AverageOutstanding


Remaining


Exercisable


RemainingExercise


at End of


Contractual


at End of


ContractualPrices


Year


Life


Year


Life$
0.001



919,207



4.42



917,875



4.42$
0.120



1,063,653



3.30



1,063,653



3.30$
0.399



31,673



4.35



31,673



4.35$
0.972



1,376,047



5.48



1,376,047



5.48$
2.350



160,000



7.82



80,000



7.82$
2.650



612,204



8.15



553,929



8.15$
3.020



50,000



7.10



34,375



7.10$
5.000



1,765,345



7.10



1,244,490



7.10$
6.320



40,000



9.66$
6.810



160,000



9.10$
6.900



1,013,000



9.15$
7.550



160,000



9.66$
9.660



68,000



9.84$
16.700



387,542



6.00



387,542



6.007,806,671







5,689,584    F-21




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS(U.S. dollars in thousands)
  NOTE 7 
    SHARE
    CAPITAL (continued):    Year Ended December 31,2008


2009


2010Research and development expenses

$
1,226


$
1,489


$
630General and administrative expenses


1,845



1,194



652$
3,071


$
2,683


$
1,282   NOTE 8 
    TAXES ON
    INCOME  a.
    The
    Company    b.
    Protalix
    Ltd.    1.
    Measurement
    of results for tax purposes    2.
    Tax
    rates         F-22




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS
(U.S. dollars in thousands)
  NOTE 8 
    TAXES ON
INCOME (continued):  3.
    The Law
    for the Encouragement of Capital Investments, 1959 (the
    Encouragement of Capital Investments Law)    a.
    Reduced
    tax rates  10-year
        b.
    Accelerated
    depreciation    c.
    Conditions
    for entitlement to the benefits    d.
    Amendment
    of the Law for the Encouragement of Capital Investments,
    1959  2011-2012,
    10-year
 F-23




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS(U.S. dollars in thousands)
  NOTE 8 
    TAXES ON
INCOME (continued):      4.
    The Law
    for the Encouragement of Industry (Taxation), 1969:        c.
    Tax
    losses carried forward to future years    1.
    The
    Company    2.
    Protalix
    Ltd.   F-24




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS
(U.S. dollars in thousands)
  NOTE 8 
    TAXES ON
INCOME (continued):  d.
    Deferred
    income taxes:    December 31,2009


2010In respect of:Property and equipment

$
161


$
143Holiday and recreation pay


200



296Severance pay obligation


87



130Deferred revenues


8,345



3,691Net operating loss carry forwards


2,246



3,599Valuation allowance


10,717



7,573



   e.
    Reconciliation
    of the theoretical tax expense to actual tax
    expense    f.
    Tax
    assessments      Jurisdiction:

Years:Israel


2005-2010United States(*)


2002-2010Netherlands


2009-2010     (*)
    
    Includes federal, state and local (or similar provincial
    jurisdictions) tax positions. F-25




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS
(U.S. dollars in thousands)
  NOTE 9 
    SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION:  Balance sheets:
  Year EndedDecember 31,2009


2010a. Accounts receivable  other:Institutions

$
740


$
634State of Israel (see Note 6a)


832



878Restricted deposit


213



226Prepaid expenses


208



354Sundry


151



139$
2,144


$
2,231b. Accounts payable and accruals  other:Payroll and related expenses

$
2,731


$
1,199Provision for vacation and recreation pay


799



1,235Accrued expenses


1,931



2,030Royalties payable


3,575



884Property and equipment supplier


4,525



2,720$
13,561


$
8,068  F-26




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS
(U.S. dollars in thousands)
  NOTE 9 
    SUPPLEMENTARY
FINANCIAL STATEMENT INFORMATION (continued):    Year Ended December 31,2008


2009


2010c. Revenues:Deferred revenues from the license and supply agreement with
    Pfizer

$



$
388


$
4,563Revenues from selling products to Pfizer










2,079$



$
388


$
6,642d. Cost of Revenues:Cost of products sold









$
807Write down of inventories










2,692Royalties expenses

$



$
3,575



884$



$
3,575


$
4,383e. Research and development expenses  net:Payroll and related expenses

$
9,296


$
10,479


$
13,176Subcontractors and consultants


5,289



7,469



11,550Materials and consumables


3,799



3,852



4,947Rent, insurance and maintenance


1,592



2,238



3,457Patent registration and licensing


182



387



571Depreciation and impairment


1,171



1,799



2,456Other


786



1,166



1,53422,115



27,390



37,691Less  grants and reimbursements:Development costs reimbursements from Pfizer










3,922Grants (see Note 6a)


4,714



5,752



3,818$
17,401


$
21,638


$
29,951f. General and administrative expense:Payroll and related expenses

$
2,261


$
2,804


$
2,415Management and consulting fees


1,335



681



221Rent, insurance and maintenance


191



347



463Professional fees


1,362



2,274



2,274Travel


472



251



308Depreciation


130



191



309Other


1,019



596



886$
6,770


$
7,144


$
6,876  F-27




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##### Table of Contents



PROTALIX
    BIOTHERAPEUTICS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS
(U.S. dollars in thousands)
  NOTE 10 
    RELATED
    PARTY TRANSACTIONS  Year Ended December 31,2008


2009


2010a.Management and consulting fees to the Chairman of the
    Board

$
33


$
33


$
6b.Compensation to the non-executive directors (except
    the Chairman of the Board in 2008 and 2009)

$
210


$
209


$
215c.With respect to options granted to the Companys Chief
    Executive Officer and to a shareholder, seeNote 7(b)1.d.In March 2005, Protalix Ltd. entered into a management services
    agreement with Pontifax Management Company, Ltd. in connection
    with an investment in Protalix Ltd. by affiliates of Pontifax.
    The monthly management fees under the management services
    agreement were $3. The management services agreement remained in
    full force as long as Mr. Hurvitz served as a member of the
    Companys Board of Directors. In 2008, the annual amount
    was set to $33 and in March 2010, Mr. Hurvitz resigned from
    the Companys Board of Directors. The management services
    agreement is no longer in effect.  NOTE 11 
    SUBSEQUENT EVENTS   F-28