UNITED STATES
                                        SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.
20549

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FORM 10-Q

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(Mark One)

||X| |  | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
         For the quarterly period ended March 31, 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)

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PROTALIX
BIOTHERAPEUTICS, INC.

(Exact name of
registrant as specified in its charter)

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|Florida

      (State or
other jurisdiction 

              of incorporation or organization)                                                          |  |  |  | 65-0643773(I.R.S. Employer 
       Identification No.)
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  |  | ------------------------------------------------------
|                                                                                                                                                       |  |  |  |                                                       
|2
Snunit Street                           
      Science Park 
       POB
455 Carmiel,
Israel                                                    21000 |  |  |  |                                                       
|                                                                                                                                                       |  |  |  |                                                       
|(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 
Common stock, par value $0.001 per share |  |  |  | Name of each exchange on which registeredAmerican
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
May 1, 2007, approximately 65,657,181 shares of the Registrants common stock, $0.001 par
value, were outstanding.

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FORM 10-Q
                                                 TABLE OF CONTENTS

|           |                                                                                       | Page
|---------- | ------------------------------------------------------------------------------------- | ----
|
|           | Cautionary Statement Regarding Forward-Looking Statements                             | ii  
|Item 1     | Financial Statements                                                                 
|           | Condensed Consolidated Balance Sheets -                                              
|           | As of March 31, 2007 (Unaudited) and December 31, 2006                                | 1   
|           | Condensed Consolidated Statements of Operations (Unaudited) -                        
|           | For the Three Months Ended March 31, 2007 and 2006                                    | 2   
|           | Condensed Consolidated Statement of Changes in Shareholders Equity -                
|           | As of March 31, 2007 (Unaudited) and December 31, 2006                                | 3   
|           | Condensed Consolidated Statements of Cash Flows (Unaudited) -                        
|           | For the Three Months Ended March 31, 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 | 9   
|Item 3     | Quantitative and Qualitative Disclosures About Market Risk                            | 12  
|Item 4     | Controls and Procedures                                                               | 12  
|           | PART II - OTHER INFORMATION                                                          
|Item 1     | Legal Proceedings                                                                     | 13  
|Item 1A    | Risk Factors                                                                          | 13  
|Item 2     | Unregistered Sales of Equity Securities and Use of Proceeds                           | 13  
|Item 3     | Defaults Upon Senior Securities                                                       | 13  
|Item 4     | Submission of Matters to a Vote of Security Holders                                   | 13  
|Item 5     | Other Information                                                                     | 13  
|Item 6     | Exhibits                                                                              | 13  
|Signatures |                                                                                       | 16  

| | 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 subsidiaries 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. 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
health                  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                   subsidiaries, our manufacturing
facilities and our customers,                   suppliers, distributors, couriers,
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 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 | 
| | -- | 

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PART I - FINANCIAL
INFORMATION

Item 1.  Financial
Statements

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

|                                                               | March 31, 2007 |  | December 31, 2006
|-------------------------------------------------------------- | -------------- |  | -----------------
|                                                               | (Unaudited)    |  |                  
|ASSETS                                                         |                |  |                  
|CURRENT ASSETS:                                                |                |  |                  
|Cash and cash equivalents                                      | $    24,896    |  | $   15,378       
|Deposit                                                        |                |  | 7,577            
|Accounts receivable                                            | 2,244          |  | 1,336            
|                                                               |                |  |                  
|Total current assets                                           | 27,140         |  | 24,291           
|                                                               |                |  |                  
|FUNDS IN RESPECT OF EMPLOYEE
           RIGHTS UPON RETIREMENT | 320            |  | 293              
|                                                               |                |  |                  
|PROPERTY AND EQUIPMENT, NET                                    | 2,898          |  | 2,404            
|                                                               |                |  |                  
|Total assets                                                   | $    30,358    |  | $   26,988       
|                                                               |                |  |                  
|LIABILITIES AND SHAREHOLDERS EQUITY                          
|CURRENT LIABILITIES -                                         
|Accounts payable and accruals:                                
|Trade                                                          | $         788  |  | $        892     
|Other                                                          | 1,442          |  | 1,376            
|                                                               |                |  |                  
|Total current liabilities                                      | 2,230          |  | 2,268            
|                                                               |                |  |                  
|LONG-TERM LIABILITY                                           
|Liability for employee rights upon retirement                  | 510            |  | 436              
|                                                               |                |  |                  
|Total liabilities                                              | 2,740          |  | 2,704            
|                                                               |                |  |                  
|SHAREHOLDERS EQUITY *                                         | 27,618         |  | 24,284           
|                                                               |                |  |                  
|Total liabilities and shareholders equity                     | $    30,358    |  | $   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)

|                                                                                                             |  | Three Months Ended |     | Period from 
December 27,
      1993* 
through |    
|------------------------------------------------------------------------------------------------------------ |  | ------------------ | --- | ---------------------------------------------- | ---
|                                                                                                             |  | March 31, 2007     |     | March 31, 2006                                 |    
|REVENUES                                                                                                     |  |                    |     |                                                |    
|COST OF REVENUES                                                                                             |  |                    |     |                                                |    
|                                                                                                             |  |                    |     |                                               
|GROSS PROFIT                                                                                                 |  |                    |     |                                                |    
|                                                                                                             |  |                    |     |                                               
|RESEARCH AND DEVELOPMENT EXPENSES (1)                                                                        |  | $          2,532   |     | $          1,236                               |    
|less - grants                                                                                                |  | (738               | )   | (373                                           | )  
|                                                                                                             |  |                    |     |                                                |    
|                                                                                                             |  | 1,794              |     | 863                                            |    
|                                                                                                             |  |                    |     |                                                |    
|GENERAL AND ADMINISTRATIVE EXPENSES (2)                                                                      |  | 1,987              |     | 774                                            |    
|                                                                                                             |  |                    |     |                                                |    
|OPERATING LOSS                                                                                               |  | 3,781              |     | 1,637                                          |    
|FINANCIAL INCOME - NET                                                                                       |  | (331               | )   | (41                                            | )  
|                                                                                                             |  |                    |     |                                                |    
|NET LOSS BEFORE CHANGE IN                                                                                    | 
|ACCOUNTING PRINCIPLE                                                                                         |  | 3,450              |     | 1,596                                          |    
|CUMULATIVE EFFECT OF                                                                                         | 
|CHANGE IN ACCOUNTING
          PRINCIPLE                                                                     |  |                    | (37 | )                                              | (37
|                                                                                                             |  |                    |     |                                                |    
|NET LOSS FOR THE PERIOD                                                                                      |  | $          3,450   |     | $          1,559                               |    
|                                                                                                             |  |                    |     |                                                |    
|NET LOSS PER SHARE OF COMMON STOCK - BASIC 
         
       AND DILUTED:                                    | 
|Prior to cumulative effect of change in accounting                                                           | 
|principle                                                                                                    |  | $            0.05  |     | $            0.08                              |    
|Cumulative effect of change in accounting principle                                                          |  |                    |     | **                                             |    
|                                                                                                             |  |                    |     |                                                |    
|                                                                                                             |  | $            0.05  |     | $            0.08                              |    
|                                                                                                             |  |                    |     |                                                |    
|WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK 
         

      USED IN COMPUTING LOSS PER COMMON STOCK: | 
|Basic and diluted                                                                                            |  | 64,365,376         |     | 18,801,527                                     |    
|                                                                                                             |  |                    |     |                                                |    
|(1) Includes share-based compensation                                                                        |  | 206                |     | 143                                            |    
|                                                                                                             |  |                    |     |                                                |    
|(2) Includes share-based compensation                                                                        |  | 1,245              |     | 527                                            |    
|                                                                                                             |  |                    |     |                                                |    

---

|* |  | 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)

|                                                                                                                                                            | Common 
Stock 
(2) | Convertible 
Preferred 
Shares | Common 
Stock | Convertible 
Preferred 
Shares | Warrants | Additional 
paid-in 
capital | Deficit 
accumulated 
during 
development 
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                           |                                                  | $    
|Exercise of options granted to employees and 
          non-employees                                                                                       | 2,670,403          |                                | 847           |                                |          | 3                            |                                                  |      
|Conversion of convertible preferred shares into 
          Common Stock                                                                                     | 24,375,870         |                                | (399,074      | )                              |          | 24                           |                                                  |      
|Change in accounting principle                                                                                                                              |                    |                                |               |                                |          |                              |                                                  |      
|Expiration of warrants                                                                                                                                      |                    |                                |               |                                |          |                              |                                                  |      
|Merger with a wholly owned subsidiary of the Company  
         

       (net of issuance cost of $642)                                                     | 583,086            |                                |               |                                |          | 1                            |                                                  |      
|Exercise of warrants                                                                                                                                        | 5,296,279          |                                |               |                                |          | 5                            |                                                  |      
|Share-based compensation                                                                                                                                    |                    |                                |               |                                |          |                              |                                                  |      
|Net loss for the period                                                                                                                                     |                    |                                |               |                                |          |                              |                                                  |      
|                                                                                                                                                            |                    |                                |               |                                |          |                              |                                                  |      
|Balance at December 31, 2006                                                                                                                                | 61,781,765         |                                |               |                                |          | 62                           |                                                  |      
|Changes during the three month period ended 
          March 31, 2007 (Unaudited):                                                                         
|Share-based compensation                                                                                                                                    |                    |                                |               |                                |          |                              |                                                  |      
|Exercise of warrants                                                                                                                                        | 3,875,416          |                                |              |                                |          | 4                            |                                                  |      
|Net loss for the period                                                                                                                                     |                   |                                |              |                                |          |                             |                                                  |      
|                                                                                                                                                            |                    |                                |               |                                |          |                              |                                                  |      
|Balance at March 31, 2007 (Unaudited)                                                                                                                       | 65,657,181         |                                |              |                                | $        | 66                           |                                                  |      
|                                                                                                                                                            |                    |                                |               |                                |          |                              |                                                  |      

---

|(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.
|--- |  | -------------------------------------------------------------------------------------------------------------

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)

|                                                                      | Three Months Ended | Period from 
December 27, 
      1993* 
through 
March 31, 2007 |  
|--------------------------------------------------------------------- | ------------------ | --------------------------------------------------------------- | -
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                                 |                    |                                                                 |  
|Net loss for the period                                               | $                  | (3,450                                                          | )
|Adjustments required to reconcile net loss to net                    
|cash used in operating activities:                                   
|Cumulative effect of change in accounting principle                   |                    |                                                                 |  
|Share based compensation                                              |                    | 1,451                                                           |  
|Depreciation and impairment of fixed assets                           |                    | 132                                                             |  
|Changes in accrued liability for employee rights                     
|upon retirement                                                       |                    | 74                                                              |  
|Loss (gain) on amounts funded in respect of                          
|employee rights upon retirement                                       |                    | (5                                                              | )
|Changes in operating assets and liabilities:                         
|Increase in accounts receivable                                       |                    | (908                                                            | )
|Increase (decrease) in accounts payable and accruals                  |                    | (113                                                            | )
|                                                                      |                    |                                                                 |  
|Net cash used in operating activities                                 | $                  | (2,819                                                          | )
|                                                                      |                    |                                                                 |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                
|Purchase of property and equipment                                    | $                  | (516                                                            | )
|Investment grant received in respect of fixed assets                  |                    |                                                                 |  
|Proceeds from sale of property and equipment                          |                    | 4                                                               |  
|Investment in restricted cash deposit                                 |                    |                                                                 |  
|Amounts funded in respect of employee rights upon
         retirement |                    | (30                                                             | )
|Amounts paid in respect of employee rights upon                      
|retirement                                                            |                    | 8                                                               |  
|                                                                      |                    |                                                                 |  
|Net cash used in investing activities                                 | $                  | (534                                                            | )
|                                                                      |                    |                                                                 |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                
|Loan and convertible bridge loan received                             |                    |                                                                 |  
|Repayment of loan                                                     |                    |                                                                 |  
|Issuance of shares and warrants, net of issuance                     
|cost                                                                  |                    |                                                                 |  
|Exercise of options and warrants                                      | $                  | 12,910                                                          |  
|Merger with a wholly owned subsidiary of the                         
|Company, net of issuance cost                                         |                    | (39                                                             | )
|                                                                      |                    |                                                                 |  
|Net cash provided by (used in) financing activities                   | $                  | 12,871                                                          |  
|                                                                      |                    |                                                                 |  
|                                                                      |                    |                                                                 |  
|NET INCREASE (DECREASE) IN CASH AND 
         CASH EQUIVALENTS        |                    | 9,518                                                           |  
|BALANCE OF CASH AND CASH EQUIVALENTS                                 
|AT BEGINNING OF PERIOD                                                |                    | 15,378                                                          |  
|                                                                      |                    |                                                                 |  
|BALANCE OF CASH AND CASH EQUIVALENTS                                 
|AT END OF PERIOD                                                      | $                  | 24,896                                                          |  
|                                                                      |                    |                                                                 |  

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

|                                           | Three Months Ended    |     | Period from 
December 27, 
1993*
|------------------------------------------ | --------------------- | --- | --------------------------------
|                                           | March 31, 
      2007 |     | March 31, 
      2006           
|SUPPLEMENTARY DISCLOSURE OF                |                       |     |                                 
|CASH FLOW INFORMATION:                    
|Cash paid during the period for interest   |                       |     |                                 
|                                           |                       |     |                                 
|SUPPLEMENTARY INFORMATION ON              
|INVESTING AND FINANCING                   
|ACTIVITIES NOT INVOLVING                  
|CASH FLOWS                                
|                                          
|Conversion of convertible bridge loan into
|shares                                     |                       |     |                                 
|                                           |                       |     |                                 
|Purchase of property and equipment         | $                     | 249 |                                 
|                                           |                       |     |                                 
|Issuance cost not yet paid                 |                       | 5   |                                 
|                                           |                       |     |                                 
|Consultants and director credit balance  
|converted into shares                      |                       |     |                                 
|                                           |                       |     |                                 
|Issuance cost paid by a grant of options   |                       |     |                                 
|                                           |                       |     |                                 
|Merger with a wholly owned subsidiary of  
|the Company:                              
|Prepaid expenses                           |                       |     |                                 
|Issuance cost setoff against accounts     
|payable                                    | $                     | 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)
is                 engaged through its wholly owned subsidiary, Protalix Ltd. in the
biotechnology field.  In recent                 years, Protalix Ltd. has been engaged in
the research and development of plant-derived human                 proteins, with its
main product under development, prGCD, being a plant-derived protein being
                developed as a treatment for Gaucher Disease.  The Company has completed
a Phase I clinical trial                 on prGCD, has received an approval to initiate
phase III study in April 2007, and expects to                 initiate it in mid 2007.
 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 18 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 18 months.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b. |  | Share
Based Compensation
| | -- |  | ------------------------

| | The
Companys management evaluated the fair value of its Common                 Stock
for the purposes of determining the fair value of the                 options granted to
consultants and non-employees, based on a                 retrospective valuation of the
fair value of the Common Stock at                 March 31, 2007, conducted by a
third-party specialist. The                 valuation specialist used various valuation
methodologies and                 determined retrospectively that the fair value of the
shares of                 Common Stock underlying the options granted to consultants and
                non-employees at March 31, 2007 was $6.19 per share.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6 | 
| | - | 

---

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

NOTE 1 - SIGNIFICANT
ACCOUNTING POLICIES (continued)

| | 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, 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 398,235 and
0 for the three months ended March                 31, 2006 and 2007, respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
diluted loss per share also does not include options and                 warrants of the
Company in the amount of 15,026,538 and                 13,008,658 for the three months
ended March 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 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.
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 7 | 
| | - | 

---

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

NOTE 1 - SIGNIFICANT
ACCOUNTING POLICIES (continued)

| | 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.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 8 | 
| | - | 

---

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 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 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

Our
only 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.

We
are a clinical stage biopharmaceutical company currently in the development stage that is
focused on developing and producing recombinant therapeutic proteins that are expressed
through our proprietary plant cell system. Recombinant therapeutic proteins are proteins
that are produced by different genetically modified organisms following the insertion of
the relevant DNA into their genome and are the basis of most biopharmaceutical drugs
currently under development. We are leveraging our plant cell culture and bioreactor
technology for the production of recombinant therapeutic proteins, and we are currently
developing several such biotherapeutic products. Our patented plant cell system enables
the expression in plant cells of specific human genes, most often genes coding for
proteins of pharmaceutical or therapeutic value. Once the plant cells produce a
therapeutic protein, such protein may be grown on an industrial scale in our proprietary
bioreactor system. Subsequently, the protein is extracted from the cells and purified to
a clinical grade. Our system presents a proprietary method for the production of
recombinant proteins that we believe is safe and scalable and may allow for the
cost-effective industrial scale production of such recombinant human therapeutic proteins.

Our
lead product candidate, prGCD, is a proprietary plant cell expressed recombinant
Glucocerebrosidase enzyme-based protein for the treatment of Gaucher Disease. In July
2005, we received FDA approval of our Investigational New Drug application, or IND, for
prGCD, allowing us to initiate an FDA-approved clinical development program for prGCD.
The Phase I clinical trial was completed in June 2006 and in April 2007 we received
written notice from the FDA that we may initiate a Phase III clinical trial in the United
States. We expect to commence the Phase III clinical trial mid-2007.

We
believe that we have demonstrated the potential of our plant cell manufacturing platform
to become a safe and efficacious expression technology for the manufacturing of a wide
variety of biopharmaceutical products.  Accordingly, we are employing a two-pronged
business strategy that enables us to pursue our goal of becoming a fully integrated
biopharmaceutical company. In addition to our development of prGCD, we are using our
protein expression technology to develop an innovative proprietary product pipeline. We
are evaluating and initiating additional internal research programs through collaboration
agreements with academic institutions, such as the Yeda Research and Development Company
Limited, the technology transfer arm of the Weizmann Institute of Science. In addition,
we continually review and consider development and commercialization alliances with
corporate partners in specific and identified markets worldwide for products or
territories in order to enable us to optimize our resources and effectively penetrate
target markets. We entered into such an agreement with Teva Pharmaceutical Industries
Ltd. in September 2006.

Since
its inception in December 1993, Protalix Ltd. has generated significant losses in
connection with the research and development of its technology, including the clinical
development of prGCD, and at March 31, 2007, we had an accumulated deficit of $24.0
million. Since we do not generate revenue from any of our product candidates, we expect
to continue to generate losses in connection with the continued clinical development of

| | 9 | 
| | - | 

---

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
March 31, 2007 compared to the three months ended March 31, 2006

Research and Development Expenses

Research
and development expenses were $2.5 million for the three months ended March 31, 2007, an
increase of $1.3 million, or 104%, from $1.2 million for the three months ended March 31,
2006. The increase resulted primarily from the increase of $1 million in salaries and
related consulting and materials associated with research and development. This increase
was partially offset by $365,000 from grants from the Office of the Chief Scientist, the
OCS, equal to $738,000 during the three months ended March 31, 2007, compared to grants
equal to $373,000 during the three months ended March 31, 2006.

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 $2.0 million for the three months ended March 31, 2007,
an increase of $1.2 million, or approximately 156%, from $774,000 for the three months
ended March 31, 2006. The increase resulted primarily from a $718,000 increase in
share-based compensation in connection with additional stock option awards granted in the
second half of 2006.

Financial Expenses and Income

Financial
income was $331,000 for the three months ended March 31, 2007, an increase of $290,000,
compared to $41,000 for the three months ended March 31, 2006. The increase resulted
primarily from a higher balance of cash and cash equivalents as of March 31, 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 as are sufficient to
satisfy our capital needs for the next 18 months.

Cash Flows

Net
cash used in operations was $2.8 million for the three months ended March 31, 2007. The
net loss for the three months ended March 31, 2007 of $3.5 million was partially offset
by $1.5 million of non-cash share-based compensation but was increased due to an increase
in accounts receivable of $1.0 million, mainly due to grants to

| | 10 | 
| | -- | 

---

be received from the OCS. Net cash
used in investing activities for the three months ended March 31, 2007 was $534,000 and
consisted primarily of purchases of property and equipment. Net cash provided by
financing activities for the three months ended March 31, 2007 was $12.9 million,
consisting of the proceeds from the exercise of certain warrants.

Net
cash used in operations was $1.1 million for the three months ended March 31, 2006. The
net loss for the three months ended March 31, 2006 of $1.6 million was mainly offset by
$670,000 of non-cash share-based compensation and depreciation equal to $98,000. Net cash
used in investing activities for the three months ended March 31, 2006 was $207,000 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 18 months.

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

Effects of Inflation
and Currency Fluctuations

Inflation
generally affects us by increasing our cost of labor and clinical trial costs. We do not
believe that inflation has had a material effect on our results of operations during the
three months ended March 31, 2007 or the three months ended March 31, 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 three months ended March 31, 2007
and the three months ended March 31, 2006.

Off-Balance Sheet
Arrangements

We
have no off-balance sheet arrangements as of March 31, 2007 and March 31, 2006.

Recently Issued
Accounting Pronouncements

On
February 15, 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities (SFAS 159). Under SFAS 159,
we may elect to report financial instruments and certain other items at fair value on a
contract-by-contract basis with changes in value reported in earnings. This election is
irrevocable. SFAS 159 provides an opportunity to mitigate volatility in reported earnings
that is caused by measuring hedged assets and liabilities that were previously required
to use a different accounting method than the related hedging contracts when the complex
provisions of SFAS 133 hedge accounting are not met. SFAS 159 is effective for fiscal
years beginning after November 15, 2007. Early adoption within 120 days of the beginning
of our 2007 fiscal year is permissible, provided a company has not yet issued interim
financial statements for 2007 and has adopted SFAS 157. We do not intend to adopt SFAS
157 early, and we are currently evaluating the impact of adopting SFAS 159 on our
financial position, cash flows, and results of operations.

| | 11 | 
| | -- | 

---

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:

|                        | Year Ended December 31,
|----------------------- | -----------------------
|
|Average rate for period |                        
|Rate at year-end        |                        

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 4.  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.

| | 12 | 
| | -- | 

---

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 March 31, 2007. Based on this evaluation, our Chief
Executive Officer and our Chief Financial Officer concluded that as of March 31, 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 first quarter of fiscal 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.

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 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 March 31,
2007 other than those disclosed in our Current Report on Form 8-K dated as of January 31,
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 

| | 13 | 
| | -- | 

---

|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
|      |  |                                                                                                                                                              |  |                                                                                                                                
|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       
|      |  |                                                                                                                                                              |  |                                                                                                                                
|10.11 |  | Stock Option
  Award Agreement by and between the Registrant and Phillip Frost, dated as of December 31, 2006                                                |  | Incorporated by
  reference to the Companys Annual Report on Form 10-K filed on March 30, 2007, SEC File No. 001-33357        
|      |  |                                                                                                                                                              |  |                                                                                                                                
|10.12 |  | Stock Option
  Award Agreement by and between the Registrant and Jane Hsiao, dated as of December 31, 2006                                                   |  | Incorporated by
  reference to the Companys Annual Report on Form 10-K filed on March 30, 2007, SEC File No. 001-33357        
|      |  |                                                                                                                                                              |  |                                                                                                                                
|10.13 |  | Stock Option
  Award Agreement grant by and between the Registrant and Steven Rubin, dated
  as of December 31, 2006                                         |  | Incorporated by
  reference to the Companys Annual Report on Form 10-K filed on March 30, 2007, SEC File No. 001-33357        
|      |  |                                                                                                                                                              |  |                                                                                                                                
|10.14 |  | First Amendment
  to the December 31, 2006 Stock Option Award Agreement by and between the
  Registrant and Phillip Frost, effective as of February 28, 2007 |  | Incorporated by
  reference to the Companys Annual Report on Form 10-K filed on March 30, 2007, SEC File No. 001-33357        
|      |  |                                                                                                                                                              |  |                                                                                                                                
|10.15 |  | First Amendment
  to the December 31, 2006 Stock Option Award Agreement by and between the
  Registrant and Jane Hsiao, effective as of February 28, 2007    |  | Incorporated by
  reference to the Companys Annual Report on Form 10-K filed on March 30, 2007, SEC File No. 001-33357        
|      |  |                                                                                                                                                              |  |                                                                                                                                
|10.16 |  | First Amendment
  to the December 31, 2006 Stock Option Award Agreement by and between the
  Registrant and Steven Rubin, effective as of February 28, 2007  |  | Incorporated by
  reference to the Companys Annual Report on Form 10-K filed on March 30, 2007, SEC File No. 001-33357        
|      |  |                                                                                                                                                              |  |                                                                                                                                
|10.17 |  | Employment
  Agreement between Protalix Ltd. and Iftah Katz, effective as of February 28, 2007                                                               |  | Incorporated by
  reference to the Companys Annual Report on Form 10-K filed on March 30, 2007, SEC File No. 001-33357        

| | 14 | 
| | -- | 

---

|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

| | 15 | 
| | -- | 

---

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

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| | -- | 

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