UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




FORM 10-Q






(Mark One)



x

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



For the quarterly period ended June 30, 2007



OR



 ̈

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



For the transition period from
		 to



001-33357

(Commission file number)




PROTALIX BIOTHERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)




|                                                                   |                                         
|------------------------------------------------------------------ | ----------------------------------------
|                                                                   |                                         
|Florida                                                            | __65-0643773__                          
|(State or other jurisdiction
			 of incorporation or organization) | (I.R.S. Employer
			 Identification No.)
|                                                                   |                                         
|2 Snunit Street
			 Science Park
			 POB 455
			 Carmiel, Israel   | 20100                                   
|(Address of principal executive office)                            | (Zip Code)                              



972-4-988-9488

(Registrants telephone number, including area code)



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



|                                         |                                          
|---------------------------------------- | -----------------------------------------
|                                         |                                          
|Title of each class                      | Name of each exchange on which registered
|Common stock, par value $0.001 per share | American Stock Exchange                  



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

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

Large accelerated filer   ̈    Accelerated
		filer   ̈   Non-accelerated
		filer  x

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

On August 13, 2007, approximately 65,665,181 shares of the
		Registrants common stock, $0.001 par value, were outstanding.





---







FORM 10-Q

TABLE OF CONTENTS



|           |                                                                                                                                     |     
|---------- | ----------------------------------------------------------------------------------------------------------------------------------- | ----
|           |                                                                                                                                     | Page
|           |                                                                                                                                     |     
|           | PART I  FINANCIAL INFORMATION                                                                                                      |     
|           | Cautionary Statement Regarding Forward-Looking Statements                                                                           | ii  
|Item 1.    | Financial Statements                                                                                                                | 1   
|           | Condensed Consolidated Balance Sheets 
			 As of June 30, 2007 (Unaudited) and December 31, 2006                                   | 1   
|           | Condensed Consolidated Statements of Operations (Unaudited) 
			 For the Three Months and Six Months Ended June 30, 2007 and 2006  | 2   
|           | Condensed Consolidated Statement of Changes in Shareholders
				Equity 
			 As of June 30, 2007 (Unaudited) and December 31, 2006 | 3   
|           | Condensed Consolidated Statements of Cash Flows (Unaudited) 
			 For the Three Months and Six Months Ended June 30, 2007 and 2006  | 4   
|           | Notes to Condensed Consolidated Financial Statements                                                                                | 6   
|Item 2.    | Managements Discussion and Analysis of Financial Condition
				and Results of Operations                                           | 10  
|Item 3.    | Quantitative and Qualitative Disclosures About Market Risk                                                                          | 14  
|Item 4T.   | Controls and Procedures                                                                                                             | 14  
|           |                                                                                                                                     |     
|           | PART II  OTHER INFORMATION                                                                                                         |     
|Item 1.    | Legal Proceedings                                                                                                                   | 16  
|Item 1A.   | Risk Factors                                                                                                                        | 16  
|Item 2.    | Unregistered Sales of Equity Securities and Use of Proceeds                                                                         | 16  
|Item 3.    | Defaults Upon Senior Securities                                                                                                     | 16  
|Item 4.    | Submission of Matters to a Vote of Security Holders                                                                                 | 16  
|Item 5.    | Other Information                                                                                                                   | 16  
|Item 6.    | Exhibits                                                                                                                            | 16  
|           |                                                                                                                                     |     
|Signatures | 18                                                                                                                                 





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

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

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

·

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

·

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

·

delays in the approval or potential
		rejection of any applications we file with the FDA, or other regulatory
		authorities;

·

any lack of progress of our research and
		development (including the results of clinical trials being conducted by us);

·

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

·

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

·

our ability to obtain additional financings
		required to fund our research programs;

·

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

·

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

·

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

·

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

·

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

·

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

·

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

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



ii



---





PART I  FINANCIAL INFORMATION



Item 1.  Financial
		Statements





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



|                             |                                               |                   |         |  |  | 
|---------------------------- | --------------------------------------------- | ----------------- | ------- |  |  | 
|                             |                                              
|                             | June 30, 2007                                 | December 31, 2006
|                             | (Unaudited)                                   |                  
|ASSETS                       |                                              
|CURRENT ASSETS:              |                                               |                  
|Cash and cash equivalents    | $22,489                                       | $15,378          
|Deposit                      |                                               | 7,577            
|Accounts receivable          | 2,277                                         | 1,336            
|Total current assets         | 24,766                                        | 24,291           
|                             |                                               |                  
|FUNDS IN RESPECT OF EMPLOYEE |                                               |                  
|RIGHTS UPON RETIREMENT       | 346                                           | 293              
|PROPERTY AND EQUIPMENT, NET  | 3,248                                         | 2,404            
|Total assets                 | $28,360                                       | $26,988          
|                             |                                               |                   |        
|                             | LIABILITIES AND SHAREHOLDERS EQUITY          |                   |        
|                             | CURRENT LIABILITIES
				-                     |                   |        
|                             | Accounts payable and accruals:                |                   |        
|                             | Trade                                         | $867              | $892   
|                             | Other                                         | 1,832             | 1,376  
|                             | Total current liabilities                     | 2,699             | 2,268  
|                             | LONG-TERM LIABILITY                           |                   |        
|                             | Liability for employee rights upon retirement | 563               | 436    
|                             | Total liabilities                             | 3,262             | 2,704  
|                             |                                               |                   |        
|                             | SHAREHOLDERS EQUITY *                        | 25,098            | 24,284 
|                             | Total liabilities and shareholders equity    | $28,360           | $26,988
|                             |                                               |                   |        

___________________________

* See Note 1a.

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



1



---





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

|                                                                                               |                  |                    |               |               |                                    |  | 
|---------------------------------------------------------------------------------------------- | ---------------- | ------------------ | ------------- | ------------- | ---------------------------------- |  | 
|                                                                                               |                  |                    |               |               | Period from December 27,
				1993*
|                                                                                               | Six Months Ended | Three Months Ended | through      
|                                                                                               | June 30, 2007    | June 30, 2006      | June 30, 2007 | June 30, 2006 | June  30, 2007                    
|                                                                                               |                  |                    |               |               |                                   
|REVENUES                                                                                       |                  |                    |               |               | $ 830                             
|COST OF REVENUES                                                                               |                  |                    |               |               | 206                               
|GROSS PROFIT                                                                                   |                  |                    |               |               | 624                               
|RESEARCH AND DEVELOPMENT EXPENSES(1)                                                           | $ 5,707          | $ 2,611            | $ 3,175       | $ 1,375       | 23,368                            
|less - grants                                                                                  | (1,081)          | (822)              | (343)         | (449)         | (6,197)                           
|                                                                                               | 4,626            | 1,789              | 2,832         | 926           | 17,171                            
|GENERAL AND ADMINISTRATIVEEXPENSES (2)                                                         | 8,490            | 1,710              | 6,503         | 936           | 17,486                            
|OPERATING LOSS                                                                                 | 13,116           | 3,499              | 9,335         | 1,862         | 34,033                            
|FINANCIAL (INCOME )
				EXPENSES NET                                                          | (506)            | (35)               | (175)         | 6             | (874)                             
|OTHER INCOME                                                                                   | (6)              |                    | (6)           |               | (6)                               
|NET LOSS BEFORE CHANGE IN                                                                      |                  |                    |               |               |                                   
|ACCOUNTING PRINCIPLE                                                                           | 12,604           | 3,464              | 9,154         | 1,868         | 33,153                            
|CUMULATIVE EFFECT OF                                                                           |                  |                    |               |               |                                   
|CHANGE IN ACCOUNTING PRINCIPLE                                                                 |                  | (37)               |               |               | (37)                              
|NET LOSS FOR THE PERIOD                                                                        | $ 12,604         | $ 3,427            | $9,154        | $ 1,868       | $33,116                           
|                                                                                               |                  |                    |               |               |                                   
|NET LOSS PER SHARE OF COMMON STOCK  BASIC AND DILUTED:                                        |                  |                    |               |               |                                   
|Prior to cumulative effect of change in accounting principle                                   | $ 0.19           | $ 0.18             | $0.14         | $  0.1        |                                   
|Cumulative effect of change in accounting principle                                            |                  | **                 |               |               |                                   
|                                                                                               | $ 0.19           | $ 0.18             | $0.14         | $  0.1        |                                   
|WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK USED IN
				COMPUTING LOSS PER COMMON STOCK: |                  |                    |               |               |                                   
|Basic and diluted                                                                              | 65,032,809       | 18,801,527         | 65,657,181    | 18,801,527    |                                   
|                                                                                               |                  |                    |               |               |                                   
|(1) Includes share-based compensation                                                          | 1,084            | 294                | 878           | 151           | 2,881                             
|(2) Includes share-based compensation                                                          | 7,001            | 1,090              | 5,756         | 563           | 11,140                            

___________________________

*

Incorporation date, see Note 1a. **

Represents an amount less than $0.01.

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



2



---







PROTALIX BIOTHERAPEUTICS, INC.

(A development stage company)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS
		EQUITY

(U.S. dollars in thousands, except share data)

|                                                                                                                          |                  |             |        |             |          |            |             |          |  |  |  | 
|------------------------------------------------------------------------------------------------------------------------- | ---------------- | ----------- | ------ | ----------- | -------- | ---------- | ----------- | -------- |  |  |  | 
|                                                                                                                          |                  |             |        |             |          |            | Deficit     |         
|                                                                                                                          |                  |             |        |             |          |            | accumulated |         
|                                                                                                                          |                  | Convertible |        | Convertible |          | Additional | during      |         
|                                                                                                                          | Common           | Preferred   | Common | Preferred   |          | paidin    | development |         
|                                                                                                                          | Stock (2)        | Shares      | Stock  | Shares      | Warrants | capital    | stage       | Total   
|                                                                                                                          | Number of shares | Amount     
|Balance at December 27, 1993 (1)                                                                                          |                  |             |        |             |          |            |             |         
|Changes during the period from December 27, 1993 through
				December 31, 2006:                                           |                  |             |        |             |          |            |             |         
|Common Stock and convertible preferred A, B and C shares and
				warrants issued for cash (net of issuance costs of $768) | 28,856,127       | 398,227     | $29    | $1          | $1,382   | $28,156    |             | $ 29,568
|Exercise of options granted toemployees and non-employees                                                                 | 2,670,403        | 847         | 3      |             |          | 394        |             | 397     
|Conversion of convertiblepreferred shares into
				CommonStock                                                            | 24,375,870       | (399,074)   | 24     | (1)         |          | (23)       |             |         
|Change in accounting principle                                                                                            |                  |             |        |             |          | (37)       | $37         |         
|Expiration of warrants                                                                                                    |                  |             |        |             | (34)     | 34         |             |         
|Merger with a wholly ownedsubsidiary of the Company (net of
				issuance costof $642)                                     | 583,086          |             | 1      |             |          | 240        |             | 241     
|Exercise of warrants                                                                                                      | 5,296,279        |             | 5      |             | (993)    | 9,658      |             | 8,670   
|Share-based compensation                                                                                                  |                  |             |        |             |          | 5,957      |             | 5,957   
|Net loss for the period                                                                                                   |                  |             |        |             |          |            | (20,549)    | (20,549)
|Balance at December 31, 2006                                                                                              | 61,781,765       |             | 62     |             | 355      | 44,379     | (20,512)    | 24,284  
|Changes during the six month period ended June 30, 2007(Unaudited):                                                       |                  |             |        |             |          |            |             |         
|Share-based compensation                                                                                                  |                  |             |        |             |          | 8,078      |             | 8,078   
|Exercise of warrants                                                                                                      | 3,875,416        | -           | 4      |             | (355)    | 5,684      |             | 5,333   
|Restricted Common Stock issued for services (3)                                                                           | 8,000            |             | *      |             |          | 7          |             | 7       
|Net loss for the period                                                                                                   | -                | -           | -      | -           | -        | -          | (12,604)    | (12,604)
|Balance at June 30, 2007 (Unaudited)                                                                                      | 65,665,181       | -           | $66    | -           | -        | $ 58,148   | $ (33,116)  | $ 25,098

______________________



*

Represents an amount less than $0.01.

(1)

Incorporation date, see Note 1a.

(2)

Common Stock, $0.001 par value; Authorized  as of December 31, 2006
		and March 31, 2007 - 150,000,000 shares.

(3)

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







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









3



---





PROTALIX BIOTHERAPEUTICS, INC.

(A development stage company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands) (Unaudited)





|                                                                                         |               |                                                          |           
|---------------------------------------------------------------------------------------- | ------------- | -------------------------------------------------------- | ----------
|                                                                                         |               |                                                         
|                                                                                         |               | Period from December 27, 1993* through June 30,
				2007
|Six Months Ended                                                                        
|June 30, 2007                                                                            | June 30, 2006
|                                                                                         |               |                                                         
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |               |                                                          |           
|Net loss for the period                                                                  | $ (12,604)    | $(3,427)                                                 | $ (33,116)
|Adjustments required to reconcile net loss to net cash used in
				operating activities: |               |                                                          |           
|Cumulative effect of change in accounting principle                                      |               | (37)                                                     | (37)      
|Share based compensation                                                                 | 8,085         | 1,384                                                    | 14,021    
|Depreciation and impairment of fixed assets                                              | 277           | 203                                                      | 1,457     
|Changes in accrued liability for employee rights upon retirement                         | 127           | 76                                                       | 563       
|Loss (gain) on amounts funded in respect of employee rights upon
				retirement          | (8)           | 9                                                        | (55)      
|Capital gain on fixed assets                                                             | (6)           |                                                          | (6)       
|Changes in operating assets and liabilities:                                             |               |                                                          |           
|Increase in accounts receivable                                                          | (941)         | (638)                                                    | (2,226)   
|Increase (decrease) in accounts payable and accruals                                     | 154           | 147                                                      | 2,258     
|Net cash used in operating activities                                                    | $ (4,916)     | $ (2,283)                                                | $ (17,141)
|                                                                                         |               |                                                          |           
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |               |                                                          |           
|Purchase of property and equipment                                                       | $ (809)       | $ (430)                                                  | $ (4,296) 
|Investment grant received in respect of fixed assets                                     |               |                                                          | 38        
|Proceeds from sale of property and equipment                                             | 10            |                                                          | 10        
|Investment in restricted cash deposit                                                    |               |                                                          | (47)      
|Amounts funded in respect of employee rights upon retirement                             | (59)          | (55)                                                     | (462)     
|Amounts paid in respect of employee rights upon retirement                               | 14            | -                                                        | 171       
|Net cash used in investing activities                                                    | $ (844)       | $ (485)                                                  | $ (4,586) 
|                                                                                         |               |                                                          |           
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                    |               |                                                          |           
|Loan and convertible bridge loan received                                                |               |                                                          | $ 2,145   
|Repayment of loan                                                                        |               |                                                          | (1,000)   
|Issuance of shares and warrants, net of issuance cost                                    |               |                                                          | 28,369    
|Exercise of options and warrants                                                         | $ 12,910      | 30                                                       | 14,400    
|Merger with a wholly owned subsidiary of the Company, net of
				issuance cost           | (39)          |                                                          | 302       
|Net cash provided by financing activities                                                | $ 12,871      | $ 30                                                     | $44,216   
|                                                                                         |               |                                                          |           
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     | 7,111         | (2,738)                                                  | 22,489    
|BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                              | 15,378        | 4,741                                                    |           
|BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD                                    | $ 22,489      | $ 2,003                                                  | $ 22,489  
|                                                                                         |               |                                                          |           





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



4



---





PROTALIX BIOTHERAPEUTICS, INC.

(A development stage company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands) (Unaudited)





(Concluded)  2

|                                                                                             |                  |               |               |  | 
|-------------------------------------------------------------------------------------------- | ---------------- | ------------- | ------------- |  | 
|                                                                                             |                  |               | Period from  
|                                                                                             |                  |               | December 27, 
|                                                                                             |                  |               | 1993*        
|                                                                                             | Six Months Ended | through      
|                                                                                             | June 30, 2007    | June 30, 2006 | June 30, 2007
|                                                                                             |                  |               |              
|SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:                                           |                  |               |              
|Cash paid during the period for
				interest                                                 |                  | **            | $ 80         
|SUPPLEMENTARY INFORMATION ON
			 INVESTING AND FINANCING ACTIVITIES NOT INVOLVING CASH FLOWS |                  |               |              
|                                                                                             |                  |              
|                                                                                             |                  |               |              
|Conversion of convertible bridge loan
				into shares                                        |                  |               | 1,145        
|Purchase of property and equipment                                                           | $ 451            | $ 57          | $ 451        
|Issuance cost not yet paid                                                                   | 5                | $ 5           | 5            
|Consultants and director credit balance                                                     |                  |               |              
|converted into shares                                                                        |                  |               | 80           
|Issuance cost paid by a grant of options                                                     |                  |               | $ 21         
|Merger with a wholly owned subsidiary of                                                     |                  |               |              
|the Company:                                                                                 |                  |               |              
|Prepaid expenses                                                                             |                  |               | 4            
|Issuance cost setoff against accounts payable                                                | $ 65             |               | $ 65         

____________________________

*

Incorporation date, see Note 1a.

**

Represents an amount less than $1.

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









5



---

PROTALIX BIOTHERAPEUTICS, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands) (Unaudited)







NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES



a.     General



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



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



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



The Company currently does not have sufficient resources to complete the
		commercialization of any of its proposed products. Based on its current cash
		resources and commitments, the Company believes it should be able to maintain
		its current planned development activities and the corresponding level of
		expenditures for at least the next 15 months, although no assurance can be
		given that it will not need additional cash prior to such time.
		 Unexpected increases in general and administrative expenses and research
		and development expenses may cause the Company to need additional financing
		during the next 15 months.



b.     Share Based Compensation





For purposes of determining the fair value of the options and shares of
		restricted Common Stock granted to employees and non-employees during the
		fiscal quarter ended June 30, 2007, the Companys management used the
		closing sale price of the Common Stock on the American Stock Exchange on the
		appropriate date. On June 29, 2007, the last trading day of the fiscal quarter
		ended June 30, 2007, the closing sale price of the Common Stock on the American
		Stock Exchange was



6



---

PROTALIX BIOTHERAPEUTICS, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands) (Unaudited)





$26.99 per share.  The Common Stock was first included for listing
		on the American Stock Exchange on March 12, 2007, and accordingly, for the year
		ended December 31, 2006, and the fiscal quarter ended March 31, 2007, the
		Companys management did not rely on the available market prices for this
		purpose as management concluded that an active market for the Common Stock did
		not exist for such periods.

c.    General Basis of Presentation



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

d.     Net Loss per share
		(LPS)



Basic and diluted LPS are computed (in accordance with SFAS No. 128
		Earnings per Share) by dividing net loss by the weighted average
		number of shares of Common Stock outstanding for each period.

Convertible preferred shares, restricted Common Stock, options, and
		warrants were not included in the computation of diluted LPS because the effect
		would be anti-dilutive.

The total weighted average (on a pre-exchange basis) number of shares of
		Common Stock related to the convertible preferred shares has been excluded from
		the calculations of diluted loss per share were 398,594 and 398,951 for the six
		and for the three months ended June 30, 2006, respectively, and 0 for the six
		and the three months ended June 30, 2007, respectively.

The diluted loss per share also does not include options, restricted
		Common Stock and warrants of the Company in the amount of 14,997,998 and
		12,404,378 for the six months ended June 30, 2006 and 2007, respectively and
		14,969,719 and 11,801,505 for the three months ended June 31, 2006 and 2007,
		respectively.



e.     Newly issued and recently adopted
		Accounting Pronouncements



1)

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



7



---

PROTALIX BIOTHERAPEUTICS, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands) (Unaudited)





1, 2007 for the Company).  The Company adopted FIN 48 on January 1,
		2007.  The adoption did not have any impact on the Companys
		financial statements.



2)

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



3)

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

4)

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

NOTE 2 - STOCK TRANSACTIONS

a.

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

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





8



---

PROTALIX BIOTHERAPEUTICS, INC.

(A development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands) (Unaudited)





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



b.

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



c.

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

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

d.

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

The Company presents restricted Common Stock as issued and
		outstanding in its financial statements. The estimate fair
		value of the options on the date of grant was approximately $215.





9



---





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



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

Overview



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



Our lead product development candidate is prGCD for the treatment of
		Gaucher disease, which we are developing using our ProCellEx protein expression
		system.  We received approval from the United States Food and Drug
		Administration, the FDA, in April 2007 to commence phase III clinical trial of
		prGCD.  We submitted to the FDA a request for a special protocol
		assessment (SPA) of the final design of our pivotal phase III clinical trial of
		prGCD.  In July 2007, we reached an agreement with the FDA on the design
		that we submitted in the SPA request.  We expect to initiate enrollment of
		patients in our phase III clinical trials in the third quarter of 2007.
		 prGCD is our proprietary recombinant form of Glucocerebrosidase (GCD), an
		enzyme naturally found in human cells that is mutated or deficient in patients
		with Gaucher disease.  The current standard of care for Gaucher disease is
		enzyme replacement therapy, a medical treatment in which GCD is replaced for
		patients in whom the enzyme is lacking or dysfunctional.  Although Gaucher
		is a relatively rare disease, it represents a large commercial market due to
		the severity of the symptoms and the chronic nature of the disease.  The
		annual worldwide sales of Cerezyme®, an enzyme replacement
		therapy produced by Genzyme and currently the only approved enzyme replacement
		therapy for Gaucher disease, were approximately $1 billion in 2006 and $547 for
		the six months ended June 30, 2007, according to public reports by Genzyme.



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

Our business is conducted by our wholly owned subsidiary, Protalix Ltd.,
		which we acquired through a reverse merger transaction effective December 31,
		2006.  The accounting treatment for the merger transaction was a
		recapitalization and as such the results of operations discussed below are
		those of Protalix Ltd.  Prior to the merger transaction, we had not
		conducted any operations for several years.  Protalix Ltd. was originally
		incorporated in Israel in December 1993.  Since its inception in
		December 1993, Protalix Ltd. has generated significant losses in
		connection with its research and development, including the clinical
		development of prGCD.  At December 31, 2006, we had an accumulated deficit
		of $20.5 million.  Since we do not generate revenue from any of our
		product



10



---





candidates, we expect to continue to generate losses in connection with
		the continued clinical development of prGCD and the research and development
		activities relating to our technology and other drug candidates.  Such
		research and development activities are budgeted to expand over time and will
		require further resources if we are to be successful.  As a result, we
		believe that our operating losses are likely to be substantial over the next
		several years.  We will need to obtain additional funds to further develop
		our research and development programs.

Critical Accounting Policies

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



Results of Operations



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



Research and Development Expenses



Research and development expenses were $3.2 million for the three
		months ended June 30, 2007, an increase of $1.8 million, or 131%, from
		$1.4 million for the three months ended June 30, 2006.  The increase
		resulted primarily from the increase of $972,000 in salaries for new and
		existing employees and related consulting and materials associated with
		research and development and from a $727,000 increase in share-based
		compensation resulting from a grant made during the three months ended June 30,
		2007 to a newly hired executive officer.

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

General and Administrative Expenses



General and administrative expenses were $6.5 million for the three
		months ended June 30, 2007, an increase of $5.6 million, or approximately 595%,
		from $936,000 for the three months ended June 30, 2006.  The increase
		resulted primarily from a $5.2 million increase in share-based compensation
		resulting primarily from the increase in the fair value of the Common Stock
		underlying the portions of certain outstanding stock options granted to
		consultants that vested during the three-month period ended June 30, 2007.

Financial Expenses and Income



Financial income was $175,000 for the three months ended June 30, 2007,
		an increase of $181,000, compared to a financial expense of $6,000 for the
		three months ended June 30, 2006.  The increase resulted primarily from
		the interest income earned on the proceeds generated from the sale of ordinary
		shares of Protalix Ltd. in September 2006 and from proceeds generated from
		the exercise of certain warrants in January 2007.

Six months ended June 30, 2007 compared to the six months ended
		June 30, 2006



Research and Development Expenses



Research and development expenses were $5.7 million for the six
		months ended June 30, 2007, an increase of $3.1 million, or 119%, from
		$2.6 million for the six months ended June 30, 2006.  The increase
		resulted primarily from the increase of $1.9 million in salaries for new and
		existing employees and related consulting and materials associated with
		research and development.  This increase was partially offset by $259,000
		from grants from the Office of the Chief Scientist, the OCS, equal to $1.1
		million during the six months ended June 30, 2007, compared to grants equal to
		$822,000 during the six months ended June 30, 2006. In addition, the increase
		resulted from a $790,000 increase in share-based compensation resulting
		primarily from a grant made during the three months ended June 30, 2007 to a
		newly hired executive officer.

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



11



---





General and Administrative Expenses



General and administrative expenses were $8.5 million for the six
		months ended June 30, 2007, an increase of $6.8 million, or approximately 396%,
		from $1.7 for the six months ended June 30, 2006.  The increase resulted
		primarily from a $5.9 million increase in share-based compensation resulting
		from the increase in the fair value of the Common Stock underlying the portions
		of certain outstanding stock options granted to consultants that vested during
		the three-month period ended June 30, 2007.

Financial Expenses and Income



Financial income was $506,000 for the six months ended June 30, 2007, an
		increase of $471,000, compared to $35,000 for the six months ended June 30,
		2006.  The increase resulted primarily from a higher balance of cash and
		cash equivalents as of June 30, 2007, which primarily resulted from the
		interest income earned on the proceeds generated from the sale of ordinary
		shares of Protalix Ltd. in September 2006 and the exercise of warrants in
		January 2007.

Liquidity and Capital Resources



Sources of Liquidity



As a result of our significant research and development expenditures and
		the lack of any approved products to generate product sales revenue, we have
		not been profitable and have generated operating losses since our inception. To
		date, we have funded our operations primarily with gross proceeds equal to
		$31.3 million from the sale of convertible preferred and ordinary shares
		of Protalix Ltd., and an additional $14.4 million in connection with the
		exercise of warrants issued in connection with the sale of such ordinary
		shares.  We believe that the funds currently available to us are
		sufficient to satisfy our capital needs for the next 15 months.

Cash Flows



Net cash used in operations was $4.9 million for the six months ended
		June 30, 2007.  The net loss for the six months ended June 30, 2007 of
		$12.6 million was partially offset by $8.1 million of non-cash share-based
		compensation but was increased due to an increase in accounts receivable of
		$941,000, mainly due to grants to be received from the OCS.  Net cash used
		in investing activities for the six months ended June 30, 2007 was $844,000 and
		consisted primarily of purchases of property and equipment.  Net cash
		provided by financing activities for the six months ended June 30, 2007 was
		$12.9 million, consisting of the proceeds from the exercise of certain
		warrants.

Net cash used in operations was $2.3 million for the six months
		ended June 30, 2006. The net loss for the three months ended June 30, 2006 of
		$3.5 million was mainly offset by $1.4 of non-cash share-based
		compensation.  Net cash used in investing activities for the six months
		ended June 30, 2006 was $485,000 and consisted primarily of purchases of
		property and equipment.

Future Funding Requirements



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

We believe that our existing cash and cash equivalents will be sufficient
		to enable us to fund our operating expenses and capital expenditure
		requirements for at least for the next 15 months.

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



12



---





funding.  On July 24, 2007, we filed a shelf registration statement
		on Form S-3 with the Securities and Exchange Commission, which will permit us
		and selling securityholders to offer and sell up to $200 million of our
		ordinary shares. Any offering will be made at the time and on the terms
		determined by market conditions at the time of sale.

Effects of Inflation and Currency Fluctuations



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

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

Off-Balance Sheet Arrangements



We have no off-balance sheet arrangements as of June 30, 2007 and June
		30, 2006.

Recently Issued Accounting Pronouncements



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

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

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

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



13



---





Item 3.  Quantitative and
		Qualitative Disclosures About Market Risk



Currency Exchange Risk

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

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

|                        |                               |                             |        |  | 
|----------------------- | ----------------------------- | --------------------------- | ------ |  | 
|                        |                               |                             |       
|                        | Six months ended
			 June 30, | Year ended
			 December 31,
|                        | 2007                          | 2006                        | 2006  
|Average rate for period | 4.1499                        | 4.5895                      | 4.4565
|Rate at year-end        | 4.2490                        | 4.4400                      | 4.2250



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

Interest Rate Risk

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

Item 4T.  Controls and
		Procedures



Evaluation of Disclosure Controls and
		Procedures



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



14



---





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

Changes in Internal Controls over Financial Reporting



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



15



---





PART II  OTHER INFORMATION

Item 1.  Legal Proceedings

We are not involved in any material legal
		proceedings.

Item 1A.  Risk Factors



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

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



There have been no unregistered sales of
		equity securities during the quarter ended June 30, 2007 other than the
		issuance of 8,000 shares of restricted stock to a new member of our Scientific
		Advisory Board as reported under Item 1.01 of our Current Report on Form 8-K
		dated as of May 30, 2007.



Item 3.  Defaults Upon
		Senior Securities



None.



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



None.



Item 5.  Other Information



None.



Item 6.
		 Exhibits

|               |                                                                               |                                                                                                                                  
|-------------- | ----------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number | Exhibit Description                                                           | Method of Filing                                                                                                                 
|3.1            | Amended and Restated Articles of Incorporation of the Company                 | Incorporated by reference to the Companys Registration
				Statement on Form S-4 filed on March 26, 1998, SEC File No. 333-48677
|3.2            | Article of Amendment to Articles of Incorporation dated June 9,
				2006      | Incorporated by reference to the Companys Registration
				Statement on Form 8-A filed on March 9, 2007, SEC File No. 001-33357 
|3.3            | Article of Amendment to Articles of Incorporation dated December
				13, 2006 | Incorporated by reference to the Companys Registration
				Statement on Form 8-A filed on March 9, 2007, SEC File No. 001-33357 
|3.4            | Article of Amendment to Articles of Incorporation dated December
				26, 2006 | Incorporated by reference to the Companys Registration
				Statement on Form 8-A filed on March 9, 2007, SEC File No. 001-33357 
|3.5            | Article of Amendment to Articles of Incorporation dated February
				26, 2007 | Incorporated by reference to the Companys Registration
				Statement on Form 8-A filed on March 9, 2007, SEC File No. 001-33357 
|3.6            | Bylaws of the Company, as amended                                             | Incorporated by reference to the Companys Registration
				Statement on Form S-4 filed on March 26, 1998, SEC File No. 333-48677



16



---







|     |                                                                                                                                              |                                                                                                                           
|---- | -------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------
|4.1  | Form of Warrant                                                                                                                              | Incorporated by reference to the Companys Current Report on
				Form 8-K filed on January 8, 2007, SEC File No. 000-27836
|31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
				as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith                                                                                                            
|31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
				as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith                                                                                                            
|32.1 | 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
				Sarbanes-Oxley Act of 2002, Certification of Chief Executive Officer   | Filed herewith                                                                                                            
|32.2 | 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
				Sarbanes-Oxley Act of 2002, Certification of Chief Financial Officer   | Filed herewith                                                                                                            





17



---





SIGNATURES

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








|                      |     |                                                                                                                   
|--------------------- | --- | ------------------------------------------------------------------------------------------------------------------
|                      |     | PROTALIX BIOTHERAPEUTICS, INC.                                                                                    
|                      |     | (Registrant)                                                                                                      
|Date: August 15, 2007 | By: | /s/ David Aviezer                                                                                                 
|                      |     | David Aviezer, Ph.D.
			 President and Chief Executive Officer
			 (Principal Executive Officer)                  
|                      |     |                                                                                                                   
|Date: August 15, 2007 | By: | /s/ Yossi Maimon                                                                                                  
|                      |     | Yossi Maimon
			 Chief Financial Officer, Treasurer and Secretary
			 (Principal Financial and Accounting Officer)
|                      |     |                                                                                                                   







18



---