|   | Nevada                                                                       |   | 20-0854033                               |   |
|--------|------------------------------------------------------------------------------|--------|------------------------------------------|--------|
|   | (State      or other jurisdictionof incorporation      or organization) |   | (I.R.S.      Employer IdentificationNo.) |   |
|   |                                                                         |   |                                     |   |
|   | 3      Sapir Street, WeizmannScience      Park                               |   |                                     |   |
|   | Nes-Ziona,      Israel                                                       |   | 74140                                    |   |
|   | (Address      of principal executiveoffices)                                 |   | (Zip      Code)                          |   |

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|   | Large      accelerated filer |  ̈                                                                                                               |                           | Accelerated      Filer |  ̈ |
|--------|------------------------------|----------------------------------------------------------------------------------------------------------------------|--------------------------------|------------------------|--------|
|   | Non-accelerated      filer   |  ̈  (Do not check if a smaller reporting company)    | Smaller      reporting company | x                      |

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|           |                                                             |   | Page   |   |
|----------------|------------------------------------------------------------------|--------|--------|--------|
|           |                                                             |   |   |   |
| Part I         |                                                             |   |   |   |
|           |                                                             |   |   |   |
| Item      1.   | Financial      Statements                                        |   |   | 3      |   |
|           |                                                             |   |   |   |   |
| Item      2.   | Management’s      Discussion and Analysis of Financial     |   |   |   |   |
|           | Condition      and Results of Operations                         |   |   | 15     |   |
|           |                                                             |   |   |   |   |
| Item      3.   | Quantitative      and Qualitative Disclosures About Market Risk  |   |   | 23     |   |
|           |                                                             |   |   |   |   |
| Item      4T.  | Controls      and Procedures                                     |   |   | 23     |   |
|           |                                                             |   |   |   |   |
| Part II        |                                                             |   |   |   |   |
|           |                                                             |   |   |   |   |
| Item      1.   | Legal      Proceedings                                           |   |   | 24     |   |
|           |                                                             |   |   |   |   |
| Item      1A.  | Risk      Factors                                                |   |   | 24     |   |
|           |                                                             |   |   |   |   |
| Item      2.   | Unregistered      Sales of Equity Securities and Use of Proceeds |   |   | 24     |   |
|           |                                                             |   |   |   |   |
| Item      3.   | Defaults      upon Senior Securities                             |   |   | 24     |   |
|           |                                                             |   |   |   |   |
| Item      4.   | Submission      of Matter to a Vote of Security Holders          |   |   | 24     |   |
|           |                                                             |   |   |   |   |
| Item      5.   | Other      Information                                           |   |   | 24     |   |
|           |                                                             |   |   |   |   |
| Item      6.   | Exhibits                                                         |   |   | 24     |   |
|           |                                                             |   |   |   |   |
| Signatures     |                                                             |   | 25     |   |
|           |                                                             |   |   |   |   |
| Certifications |                                                             |   | 26     |   |

----

|                                                                                                                                                                                                                                 |   | September      30, |        |   | December      31, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-------------|--------|-------------------|--------|
|                                                                                                                                                                                                                                 |   | 2009               |        |   | 2008              |   |
|                                                                                                                                                                                                                                 |   | (Unaudited)        |        |   |              |   |
| ASSETS                                                                                                                                                                                                                               |   |               |        |   |              |   |
| Current      Assets:                                                                                                                                                                                                                 |   |               |        |   |              |   |
| Cash      and cash equivalents                                                                                                                                                                                                       |   | $                  | 4,580,301   |   |              | $      | 7,465,232 |   |
| Accounts      receivable and prepaid expenses                                                                                                                                                                                        |   |               | 1,103,434   |   |              |   | 412,515 |   |
| Restricted      cash                                                                                                                                                                                                                 |   |               | 92,144      |   |              |   | 91,078 |   |
| Total      current assets                                                                                                                                                                                                            |   |               | 5,775,879   |   |              |   | 7,968,825 |   |
| Property      and equipment, net                                                                                                                                                                                                     |   |               | 298,901     |   |              |   | 310,173 |   |
| Long-term      Assets:                                                                                                                                                                                                               |   |               |        |   |              |   |   |   |
| Severance      pay fund                                                                                                                                                                                                              |   |               | 110,470     |   |              |   | 73,775 |   |
| Long      term deposit                                                                                                                                                                                                               |   |               | 1,917       |   |              |   | 1,894 |   |
| Total      long term assets                                                                                                                                                                                                          |   |               | 112,387     |   |              |   | 75,669 |   |
| Total      assets                                                                                                                                                                                                                    |   | $                  | 6,187,167   |   |              | $      | 8,354,667 |   |
|                                                                                                                                                                                                                                 |   |               |        |   |              |   |   |   |
| LIABILITIES      AND SHAREHOLDERS’ EQUITY                                                                                                                                                                                      |   |               |        |   |              |   |   |   |
| Current      Liabilities:                                                                                                                                                                                                            |   |               |        |   |              |   |   |   |
| Trade      payables                                                                                                                                                                                                                  |   | $                  | 171,846     |   |              | $      | 156,039 |   |
| Related      party  payables                                                                                                                                                                                               |   |               | 45,912      |   |              |   | 51,374 |   |
| Accrued      expenses and other liabilities                                                                                                                                                                                          |   |               | 246,641     |   |              |   | 188,660 |   |
| Total      current liabilities                                                                                                                                                                                                       |   |               | 464,399     |   |              |   | 396,073 |   |
| Accrued      severance pay                                                                                                                                                                                                           |   |               | 127,043     |   |              |   | 90,732 |   |
| Commitments      and contingent liabilities                                                                                                                                                                                          |   |               |        |   |              |   |   |   |
| Shareholders’      equity:                                                                                                                                                                                                     |   |               |        |   |              |   |   |   |
| Stock      capital -                                                                                                                                                                                                                 |   |               |        |   |              |   |   |   |
| Preferred      stock of $ 0.00001 par value –10,000,000      shares of preferred stock authorized, 1,800,000 issued and outstanding as      of September 30, 2009, 800,000 issued and outstanding as of December 31,      2008 |   |               |  18    |   |              |   | 8 |   |
| Common      stock of $ 0.00001 par value –300,000,000      shares of common stock authorized; 35,549,017 shares issued and      outstanding as of September 30, 2009 and December 31, 2008                                     |   |               | 355         |   |              |   | 355 |   |
| Additional      paid-in capital                                                                                                                                                                                                      |   |               | 29,976,122  |   |              |   | 27,407,606 |   |
| (Deficit)      accumulated during the development stage                                                                                                                                                                              |   |               | (24,380,770 | )      |              |   | (19,540,107 | ) |
| Total      shareholders’ equity                                                                                                                                                                                                |   |               | 5,595,725   |   |              |   | 7,867,862 |   |
| Total      liabilities and shareholders’ equity                                                                                                                                                                                |   | $                  | 6,187,167   |   |              | $      | 8,354,667 |   |

----

|                                               |   |                           |       |          |                            |   |       | Period      fromMay      31, 2005 |   |
|----------------------------------------------------|--------|--------------------------------|------------|---------------|---------------------------------|--------|------------|-----------------------------------|--------|
|                                               |   | For      the nine months ended |       |          | For      the three months ended |   |       | (date      ofinception) to        |   |
|                                               |   | September      30,             |       |          | September      30,              |   |       | September      30,                |   |
|                                               |   | 2009                           |       |          | 2008                            |   |       | 2009                              |   |   | 2008 |   |   | 2009 |   |
|                                               |   |                                |       |          |                                 |   |       |                                   |   |   |  |   |   |   |   |
| Revenues                                           |   | $                              | -          |          |                            | $      | -          |                              |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|                                               |   |                           |       |          |                            |   |       |                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      expenses:                           |   |                           |       |          |                            |   |       |                              |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               |   |                           |       |          |                            |   |       |                              |   |   |   |   |   |   |   |   |   |   |   |   |
| In-process      research and development write-off |   |                           | -     |          |                            |   | -          |                              |   |   | -  |   |   |   | -  |   |   |   | 3,222,831 |   |
| Research      and development, net                 |   |                           | 3,466,320  |          |                            |   | 3,271,560  |                              |   |   | 575,917 |   |   |   | 1,175,602 |   |   |   | 11,011,755 |   |
| General      and administrative                    |   |                           | 1,374,910  |          |                            |   | 1,762,217  |                              |   |   | 401,868 |   |   |   | 540,786 |   |   |   | 10,692,484 |   |
| Total      operating expenses                      |   |                           | 4,841,230  |          |                            |   | 5,033,777  |                              |   |   | 977,785 |   |   |   | 1,716,388 |   |   |   | 24,927,070 |   |
|                                               |   |                           |       |          |                            |   |       |                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      (loss)                              |   |                           | (4,841,230 | )        |                            |   | (5,033,777 | )                            |   |   | (977,785 | )        |   |   | (1,716,388 | )        |   |   | (24,927,070 | ) |
|                                               |   |                           |       |          |                            |   |       |                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial      income                              |   |                           | 101,234    |          |                            |   | 218,837    |                              |   |   | 73,256 |   |   |   | - |   |   |   | 942,921 |   |
| Financial      (expenses)                          |   |                           | (100,667   | )        |                            |   | -          |                              |   |   | ( 1,041 | )        |   |   | (136,648 | )         |   |   | (396,621 | ) |
|                                               |   |                           |       |          |                            |   |       |                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      (loss)                                    |   | $                              | (4,840,663 | )        |                            | $      | (4,814,940 | )                            |   | $ | (905,570 | )        |   | $ | (1,853,036 | )        |   | $ | (24,380,770 | ) |
|                                               |   |                           |       |          |                            |   |       |                              |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss)      per share (basic      & diluted)   |   | $                              | (0.14      | )        |                            | $      | (0.14      | )                            |   | $ | (0.03 | )        |   | $ | (0.05 | )        |   | $ | (0.95 | ) |
|                                               |   |                           |       |          |                            |   |       |                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average number of shares outstanding |   |                           | 35,549,028 |          |                            |   | 35,523,748 |                              |   |   | 35,549,028 |   |   |   | 35,549,028 |   |   |   | 25,688,601 |   |

----

|                                                                                                 |   |                      |       |   | Period      fromMay      31, 2005 |   |
|------------------------------------------------------------------------------------------------------|--------|--------------------------------|------------|--------|-----------------------------------|--------|
|                                                                                                 |   | For      the nine months ended |       |   | (date      of inception)          |   |
|                                                                                                 |   | September 30,             |       |   | to      September 30,             |   |
|                                                                                                 |   | 2009                           |       |   | 2008                              |   |   | 2009 |   |
| Cash flows from operating      activities                                                            |   |                           |       |   |                              |   |   |   |   |
| Net      (loss)                                                                                      |   | $                              | (4,840,663 | )      |                              | $      | (4,814,940 | ) |   | $ | (24,380,770 | ) |
| Adjustments      to reconcile net (loss) to net cash (used  in) operating      activities: |   |                           |       |   |                              |   |   |   |   |   |   |   |
| Depreciation                                                                                         |   |                           | 58,112     |   |                              |   | 42,921 |   |   |   | 178,545 |   |
| In-process      research and development write-off                                                   |   |                           |       |   |                              |   |   |   |   |   | 3,222,831 |   |
| Stock      based compensation                                                                        |   |                           | 572,526    |   |                              |   | 828,819 |   |   |   | 7,039,970 |   |
| (Decrease)      increase in accrued severance pay, net                                               |   |                           | (384       | )      |                              |   | 31,975 |   |   |   | 16,573 |   |
| Decrease      (increase) in accounts receivable and prepaid expenses                                 |   |                           | (690,919   | )      |                              |   | 399,082 |   |   |   | (1,103,157 | ) |
| Increase      in trade payables                                                                      |   |                           | 15,807     |   |                              |   | 29,110 |   |   |   | 161,742 |   |
| Increase      (decrease) in related party payables                                                   |   |                           | (5,462     | )      |                              |   | 36,032 |   |   |   | 45,912 |   |
| Increase      (decrease) in accrued expenses and other liabilities                                   |   |                           | 57,981     |   |                              |   | (67,402 | ) |   |   | 125,625 |   |
| Net      cash (used in) operating activities                                                         |   |                           | (4,833,024 | )      |                              |   | (3,514,403 | ) |   |   | (14,692,729 | ) |
|                                                                                                 |   |                           |       |   |                              |   |   |   |   |   |   |   |
| Cash flows from investing      activities                                                            |   |                           |       |   |                              |   |   |   |   |   |   |   |
| Purchase      of property and equipment                                                              |   |                           | (46,840    | )      |                              |   | (184,788 | ) |   |   | ( 463,090 | ) |
| Payment      for the acquisition of ModigeneTech Ltd.                                                |   |                           | -          |   |                              |   | - |   |   |   | ( 474,837 | ) |
| Long      term deposit                                                                               |   |                           | (23        | )      |                              |   | - |   |   |   | ( 1,917 | ) |
| Restricted      cash                                                                                 |   |                           | (1,066     | )      |                              |   | ( 39,859 | ) |   |   | ( 92,144 | ) |
| Net      cash (used in) investing activities                                                         |   |                           | (47,929    | )      |                              |   | (224,647 | ) |   |   | ( 1,031,988 | ) |
|                                                                                                 |   |                           |       |   |                              |   |   |   |   |   |   |   |
| Cash flows from financing      activities                                                            |   |                           |       |   |                              |   |   |   |   |   |   |   |
| Short      term bank credit                                                                          |   |                           | -          |   |                              |   | ( 1,866 | ) |   |   | ( 2,841 | ) |
| Proceeds      from loans                                                                             |   |                           | -          |   |                              |   | - |   |   |   | ( 173,000 | ) |
| Principal      payment of loans                                                                      |   |                           | -          |   |                              |   | - |   |   |   | 173,000 |   |
| Proceeds      from issuance of shares, net                                                           |   |                           | 1,996,000  |   |                              |   | 2,000,000 |   |   |   | 20,307,859 |   |
| Net      cash provided by financing activities                                                       |   |                           | 1,996,000  |   |                              |   | 1,998,134 |   |   |   | 20,305,018 |   |
|                                                                                                 |   |                           |       |   |                              |   |   |   |   |   |   |   |
| Increase      (decrease) in cash and cash equivalents                                                |   |                           | (2,884,931 | )      |                              |   | (1,740,916 | ) |   |   | 4,580,301 |   |
| Cash      and cash equivalents at the beginning of the period                                        |   |                           | 7,465,232  |   |                              |   | 11,455,807 |   |   |   | - |   |
| Cash      and cash equivalents at the end of the period                                              |   | $                              | 4,580,301  |   |                              | $      | 9,714,891 |   |   | $ | 4,580,301 |   |
|                                                                                                 |   |                           |       |   |                              |   |   |   |   |   |   |   |
| Non      cash transactions:                                                                          |   |                           |       |   |                              |   |   |   |   |   |   |   |
| Employee      options exercised into shares                                                          |   | $                              | -          |   |                              | $      | - |   |   | $ | 140 |   |
| Issuance      of common stock in reverse acquisition                                                 |   | $                              | -          |   |                              | $      | - |   |   | $ | 73 |   |
|                                                                                                 |   |                           |       |   |                              |   |   |   |   |   |   |   |
| Additional      information:                                                                         |   |                           |       |   |                              |   |   |   |   |   |   |   |
| Cash      paid for income taxes                                                                      |   | $                              | -          |   |                              | $      | - |   |   | $ | - |   |
| Cash      paid for interest expense                                                                  |   | $                              | 59         |   |                              | $      | 830 |   |   | $ | 296,028 |   |

----

| NOTE      1:- | GENERAL |
|---------------|---------|
|          |    |
|          | a.      | PROLOR      Biotech, Inc. (the “Company”) was formed on August 22, 2003 under the laws      of the state of Nevada.  The Company is engaged in the      development of therapeutic proteins with extended half-lifes, through its      subsidiaries, Modigene Inc., a Delaware based subsidiary and ModigeneTech      Ltd., an Israeli based subsidiary.On      June 12, 2009 the company changed its name from Modigene Inc. to PROLOR      Biotech, Inc. |
|          |    |
|          | b.      | The      Company is devoting substantially all of its efforts toward conducting      research and development activities. The Company’s activities also include      raising capital, recruiting personnel and building infrastructure. In the      course of such activities, the Company has sustained operating losses and      expects such losses to continue for the foreseeable future. The Company      has not generated any revenues or product sales and has not achieved      profitable operations or positive cash flow from operations. The Company’s      deficit accumulated during the development stage aggregated $24,380,770      through September 30, 2009. There is no assurance that profitable      operations, if ever achieved, could be sustained on a continuing basis.      The Company believes that its current cash sources will enable the      continuance of the Company’s activities for at least a year with no need      of additional financing. |
|          |    |
|          | c.      | On      July 22, 2009, the Company entered into a securities purchase agreement      (the “Purchase Agreement”) with certain private investors (the      “Investors”), pursuant to which the Investors agreed to purchase an      aggregate of up to 5,000,000 shares (the “Shares”) of the Company’s      newly-designated 10.0% Series B Cumulative Convertible Preferred Stock,      par value $0.00001 per share (“Series B Preferred Stock”), at a purchase      price of $2.00 per share.  On July 23, 2009 (the “Closing      Date”), the Company closed on the issuance of 1,000,000 Shares for      aggregate consideration of $1,996,000 ($2,000,000 net of issuance costs of      $4,000). Under the Purchase Agreement, the Company may elect, in its sole      discretion, to close on the sale and issuance of up to an additional $8      million of Series B Preferred Stock, at a purchase price of $2.00 per      share, on any date on or prior to March 25, 2013, subject to providing the      Investors thirty days prior written notice of such closing      date.  The Company must issue a minimum of $2 million of Series      B Preferred Stock in any such future closing; however, the Company is not      obligated to effect any such futureclosings. |

----

| NOTE      1:- | GENERAL      (continued) |
|---------------|--------------------------|
|          |                     |   |
|          | d.                       | On      March 25, 2009, the Company entered into a Credit Agreement with a group      of investors, which line of credit provided the Company with borrowing      availability of up to $10,000,000 for working capital or general corporate      purposes.  The Credit Agreement was terminated on July 22, 2009,      pursuant to a Termination of Credit Agreement and Cancellation of Note and      Security Agreement. |
|          |                     |   |
|          | e.                       | On      July 27, 2009, the Company entered into an evaluation and option agreement      with Yeda Research and Development Co. Ltd. (“Yeda”), pursuant to which      the Company may obtain from Yeda a license for the right to develop a      number of peptide drug candidates, including an anti-obesity drug      candidate. |

| NOTE      2:- | SIGNIFICANT      ACCOUNTING POLICIES |
|---------------|--------------------------------------|
|          |                                 |
|          | a.                                   | Basis      of presentation: |
|          |                                 | The      accompanying unaudited financial statements of the Company are presented      in accordance with the requirements for Form 10-Q and Article 10 of      Regulation S-X. Certain information and footnote disclosures normally      included in financial statements prepared in accordance with accounting      principles generally accepted in the United States of America (“US GAAP”)      have been condensed or omitted pursuant to such SEC rules and regulations.      In the opinion of management, all adjustments (consisting of normal      recurring adjustments) considered necessary for a fair presentation have      been made. The results for these interim periods are not necessarily      indicative of the results for the entire year. The accompanying financial      statements should be read in conjunction with the December 31, 2008      financial statements and the notes thereto included in the Company’s      Report on Form 10-K filed March 16, 2009. |
|          |                                 |   |
|          | b.                                   | Principles      of consolidation: |
|          |                                 | The      consolidated financial statements include the accounts of the Company and      its wholly-owned subsidiaries Modigene Inc. and ModigeneTech      Ltd.  Intercompany transactions and balances have been      eliminated upon consolidation. |

----

| NOTE      2:- | SIGNIFICANT ACCOUNTING      POLICIES (continued) |
|---------------|--------------------------------------------------|
|          |                                             |   |
|          | c.                                               | Loss      per share: |
|          |                                             | Basic      and diluted losses per share are presented in accordance with ASC No. 260      “Earnings per share” (formerly SFAS No. 128), Outstanding share options      and warrants have been excluded from the calculation of the diluted loss      per share because all such securities are antidilutive. Securities      excluded from the calculation for the three month periods ended September      30, 2009 and 2008, were 9,420,772 and 7,971,668, respectively. Securities      excluded from the calculation for the nine months ended September 30, 2009      and 2008, were 9,372,821 and 7,493,100, respectively. Securities excluded      from the calculation for the period from May 31, 2005 (date of inception)      to September 30, 2009, were5,194,398. |

| NOTE      3:- | RECENT      ACCOUNTING  PRONOUNCEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|          |        In February 2008, the FASB issued an accounting standard update that      delayed the effective date of fair value measurements accounting for all      non-financial assets and non-financial liabilities, except for items that      are recognized or disclosed at fair value in the financial statements on a      recurring basis (at least annually), until the beginning of the first      quarter of fiscal 2009. These include goodwill and other non-amortizable      intangible assets. The Company adopted this accounting standard update      effective January 1, 2009. The adoption of this update to      non-financial assets and liabilities, as codified in ASC 820-10 (formerly      FSP 157-2, “Effective Date of FASB Statement No. 157”), did not have      any impact on the Company’s consolidated financial    statements.                                                                                                                                                                                     |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|          |        Effective January 1, 2009, the Company adopted a new accounting      standard update regarding business combinations. As codified under ASC 805      (formerly SFAS No. 141 revised 2007, “Business Combinations”), this      update requires an entity to recognize the assets acquired, liabilities      assumed, contractual contingencies, and contingent consideration at their      fair value on the acquisition date. It further requires that      acquisition-related costs be recognized separately from the acquisition      and expensed as incurred; that restructuring costs generally be expensed      in periods subsequent to the acquisition date; and that changes in      accounting for deferred tax asset valuation allowances and acquired income      tax uncertainties after the measurement period be recognized as a      component of provision for taxes. In addition, acquired in-process      research and development is capitalized as an intangible asset and      amortized over its estimated useful life. |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

----

| NOTE      3:- | RECENT      ACCOUNTING  PRONOUNCEMENTS (Continued) |
|---------------|-------------------------------------------------------------------|

|   | With      the adoption of this accounting standard update, any tax related      adjustments associated with acquisitions that closed prior to      January 1, 2009 will be recorded through income tax expense, whereas      the previous accounting treatment would require any adjustment to be      recognized through the purchase price.  This accounting standard      update applies prospectively to business combinations for which the      acquisition date is on or after the beginning of the first annual      reporting period beginning on or after December 15, 2008. The adoption of      this accounting update did not have any impact on the Company’s      consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | Effective      January 1, 2009, the Company adopted an accounting standard which      establishes accounting and reporting standards for the noncontrolling      interest in a subsidiary and for the deconsolidation of a subsidiary, as      codified in ASC 810-10 (formerly SFAS No. 160, “Accounting and      Reporting on Non-controlling Interest in Consolidated Financial      Statements, an Amendment of ARB 51”). This accounting standard states that      accounting and reporting for minority interests are to be recharacterized      as noncontrolling interests and classified as a component of equity. The      calculation of earnings per share continues to be based on income amounts      attributable to the parent.  The adoption of this accounting      update did not have any impact on the Company’s consolidated financial      statements.                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | Effective      January 1, 2009, the Company adopted an accounting standard update      regarding the determination of the useful life of intangible assets. As      codified in ASC 350-30-35 (formerly FSP No. 142-3, “Determination of      the Useful Life of Intangible Assets”), this update amends the factors      considered in developing renewal or extension assumptions used to      determine the useful life of a recognized intangible asset under      intangibles accounting. It also requires a consistent approach between the      useful life of a recognized intangible asset under prior business      combination accounting and the period of expected cash flows used to      measure the fair value of an asset under the new business combinations      accounting (as currently codified under ASC 850). The update also requires      enhanced disclosures when an intangible asset’s expected future cash flows      are affected by an entity’s intent and/or ability to renew or extend the      arrangement. The adoption of this accounting update did not have any      impact on the Company’s consolidated financial  statements. |

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| NOTE      3:- | RECENT      ACCOUNTING  PRONOUNCEMENTS (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|          | Effective      January 1, 2009, the Company adopted a new accounting standard update      from the Emerging Issues Task Force (“EITF”) consensus regarding the      accounting of defensive intangible assets. This update, as codified in ASC      350-30 (formerly EITF No. 08-7, “Accounting for Defensive Intangible      Assets”), clarifies accounting for defensive intangible assets subsequent      to initial measurement. It applies to acquired intangible assets which an      entity has no intention of actively using, or intends to discontinue use      of, the intangible asset but holds it to prevent others from obtaining      access to it (i.e., a defensive intangible asset). Under this update, a      consensus was reached that an acquired defensive asset should be accounted      for as a separate unit of accounting (i.e., an asset separate from other      assets of the acquirer); and the useful life assigned to an acquired      defensive asset should be based on the period during which the asset would      diminish in value. The adoption of this accounting update did not have any      impact on the Company’s consolidated financial  statements. |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|          |   Effective      April 1, 2009, the Company adopted a new accounting standard for      subsequent events, as codified in ASC 855-10 (formerly SFAS No. 165,      “Subsequent Events”). The update modifies the names of the two types of      subsequent events either as recognized subsequent events (previously      referred to in practice as Type I subsequent events) or non-recognized      subsequent events (previously referred to in practice as Type II      subsequent events). In addition, the standard modifies the definition of      subsequent events to refer to events or transactions that occur after the      balance sheet date, but before the financial statements are issued (for      public entities) or available to be issued (for nonpublic entities). It      also requires the disclosure of the date through which subsequent events      have been evaluated. The update did not result in significant changes in      the practice of subsequent event disclosures, and therefore the adoption      did not have any impact on the Company’s consolidated financial      statements.                                                                                   |

|   | Effective      April 1, 2009, the Company adopted three accounting standard updates      which were intended to provide additional application guidance and      enhanced disclosures regarding fair value measurements and impairments of      securities. They also provide additional guidelines for estimating fair      value in accordance with fair value accounting. The first update, as      codified in ASC 820-10-65 (formerly FASB Staff Positions (“FSP”)      No. 157-4, “Determining Fair Value When the Volume and Level of      Activity for the Asset or Liability Have Significantly Decreased and      Identifying Transactions That Are Not Orderly”), provides additional      guidelines for estimating |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| NOTE      3:- | RECENT      ACCOUNTING  PRONOUNCEMENTS (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|          | fair      value in accordance with fair value accounting. The second accounting      update, as codified in ASC 320-10-65 (formerly FSP No. 115-2,      “Recognition and Presentation of Other-Than-Temporary Impairments”),      changes accounting requirements for other-than-temporary-impairment (OTTI)      for debt securities by replacing the current requirement that a holder      have the positive intent and ability to hold an impaired security to      recovery in order to conclude an impairment was temporary with a      requirement that an entity conclude it does not intend to sell an impaired      security and it will not be required to sell the security before the      recovery of its amortized cost basis. The third accounting update, as      codified in ASC 825-10-65 (formerly Accounting Principles Board (“APB”)      Opinion No. 28-1, “Interim Disclosures about Fair Value of Financial      Instruments”), increases the frequency of fair value disclosures. These      updates were effective for fiscal years and interim periods ended after      June 15, 2009. The adoption of these accounting updates did not have      any impact on the Company’s consolidated financial    statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|          | Effective      July 1, 2009, the Company adopted The “FASB Accounting Standards      Codification” and the Hierarchy of Generally Accepted Accounting      Principles (ASC 105), (formerly SFAS No. 168, The “FASB Accounting Standards      Codification” and the Hierarchy of Generally Accepted Accounting      Principles). This standard establishes only two levels of U.S.      generally accepted accounting principles (“GAAP”), authoritative and      nonauthoritative. The Financial Accounting Standard Board (“FASB”)      Accounting Standards Codification (the “Codification”) became the source      of authoritative, nongovernmental GAAP, except for rules and      interpretive releases of the SEC, which are sources of authoritative GAAP      for SEC registrants. All other non-grandfathered, non-SEC accounting      literature not included in the Codification became nonauthoritative. The      Company began using the new guidelines and numbering system prescribed by      the Codification when referring to GAAP in the third quarter of fiscal      2009. Authoritative standards included in the Codification are designated      by their Accounting Standards Codification (ASC) topical reference, and      new standards will be designated as Accounting Standards Updates (ASU),      with a year and assigned sequence number.  Beginning with this      interim report for the third quarter of 2009, references to prior      standards have been updated to reflect the new referencing system. As the      Codification was not intended to change or alter existing GAAP, it did not      have any impact on the Company’s consolidated financial      statements. |

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| NOTE      3:- | RECENT      ACCOUNTING  PRONOUNCEMENTS (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|          | In      June 2009, the FASB concurrently issued amendments to ASC 860, Transfers and Servicing      (formerly SFAS No. 166), and ASC 810, Consolidation (formerly      SFAS No. 167),      that change the way entities account for securitizations and other      transfers of financial instruments.  In addition to increased      disclosure, these amendments eliminate the concept of qualifying special      purpose entities and change the test for consolidation of variable      interest entities.  These amendments will be effective as of January      1, 2010.  The Company has evaluated these amendments and believes      that they will have no impact on its financial condition or results of      operations.                                                                                                                                                         |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|          | In      October 2009, the FASB concurrently issued the following Accounting      Standards Updates:•           ASU No. 2009-14 - Software (Topic 985): Certain      Revenue Arrangements That Include Software Elements (formerly EITF      Issue No. 09-3).      This standard removes tangible products from the scope of software      revenue recognition guidance and also provides guidance on determining      whether software deliverables in an arrangement that includes a tangible      product, such as embedded software, are within the scope of the software      revenue guidance.                                                                                                                                                                                                                                                                               |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|          | ·           ASU      No. 2009-13 - Revenue      Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements      (formerly EITF Issue No. 08-1).  This standard modifies the      revenue recognition guidance for arrangements that involve the delivery of      multiple elements, such as product, software, services or support, to a      customer at different times as part of a single revenue generating      transaction.  This standard provides principles and application      guidance to determine whether multiple deliverables exist, how the      individual deliverables should be separated and how to allocate the      revenue in the arrangement among those separate deliverables. The standard      also expands the disclosure requirements for multiple deliverable revenue      arrangements. |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|          | These      Accounting Standards Updates should be applied on a prospective basis for      revenue arrangements entered into or materially modified in fiscal years      beginning on or after June 15, 2010, with earlier application      permitted.  Alternatively, an entity can elect to adopt these      standards on a retrospective basis, but both these standards must be      adopted in the same period using the same transition      method.  The Company does not expect these updates to have any      impact on its financial position and results of  operations.                                                                                                                                                                                                                                                                                                           |

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| NOTE      4:- | EMPLOYEES’      STOCK OPTION PLANS |
|---------------|------------------------------------------|

|   | The      Company issued stock options to purchase shares of common stock under the      2005 Stock Incentive Plan (the “2005 Plan”) and the 2007 Equity Incentive      Plan (the “2007 Plan”).On      May 22, 2009, the Company approved an amendment to the 2007 Plan,      which increased the number of shares authorized for issuance under the      2007 Plan from 3,000,000 shares to 6,000,000 shares. The Amendment became      effective on May 28, 2009.The      Company accounts for stock based compensation using the fair value      recognition provisions of ASC No. 718 “Compensation – stock compensation”      (formerly SFAS No. 123R), The fair value of each stock option is estimated      based upon grant date fair value using the Black-Scholes option-pricing      model.The      following weighted average assumptions were used for the options granted      during the year 2009: (i) annual dividends of $0.00, (ii) expected      volatility of 117%, (iii) risk-free interest rate of 0.01%, and (iv)      expected average option lives of 10years. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      following is a summary of the stock options granted under the 2005 and      2007 Plans: |
|--------|--------------------------------------------------------------------------------------------------|

|                                            |   | For the nine months ended |      |
|-------------------------------------------------|--------|-----------------------------------------------|-----------|
|                                            |   | September 30, 2009                  |      |
|                                            |   | Numberof Options                         |      |   | Weighted AverageExercise Price |   |
|                                            |   |                                          |      |   |   |   |
| Outstanding      at the beginning of the period |   |                                          | 4,432,292 |   |   | $ | 1.14 |   |
| Issued      under the 2005 plan                 |   |                                          | 175,500   |   |   | $ | 0.65 |   |
| Issued      under the 2007 plan                 |   |                                          | 200,000   |   |   | $ | 0.65 |   |
| Forfeited                                       |   |                                          | (2,353    | ) |   | $ | 1.49 |   |
| Outstanding      at the end of the period       |   |                                          | 4,805,439 |   |   | $ | 1.10 |   |
|                                            |   |                                          |      |   |   |   |   |   |
| Options      exercisable                        |   |                                          | 2,721,397 |   |   | $ | 1.19 |   |

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| NOTE      4:- | EMPLOYEES’      STOCK OPTION PLANS (continued)                                                                                   |   |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------|--------|
|          |                                                                                                                                   |
|          | The      options outstanding as of  September  30, 2009, have      been separated into exercise prices, asfollows: |

|                |   |               |      |      | Remaining      WeightedAverage |   |   |               |   |
|---------------------|--------|--------------------|-----------|-----------|--------------------------------|--------|--------|--------------------|--------|
| Exercise      Price |   | OptionsOutstanding |      |      | Contractual      Life(years)   |   |   | OptionsExercisable |   |
|                |   |               |      |      |                           |   |   |               |   |
| $                   | 0.650  |               |      | 375,500   |                           |   |   | 9.35               |   |   |   | 0 |   |
| $                   | 0.879  |               |      | 1,265,474 |                           |   |   | 6.47               |   |   |   | 1,265,474 |   |
| $                   | 0.900  |               |      | 1,950,000 |                           |   |   | 8.42               |   |   |   | 487,500 |   |
| $                   | 0.930  |               |      | 25,000    |                           |   |   | 8.43               |   |   |   | 8,333 |   |
| $                   | 1.320  |               |      | 435,146   |                           |   |   | 3.42               |   |   |   | 435,146 |   |
| $                   | 1.500  |               |      | 130,500   |                           |   |   | 8.57               |   |   |   | 40,958 |   |
| $                   | 2.000  |               |      | 475,000   |                           |   |   | 7.61               |   |   |   | 341,667 |   |
| $                   | 2.500  |               |      | 148,819   |                           |   |   | 3.51               |   |   |   | 142,319 |   |
|                |   |               | 4,805,439 |      |                           |   | 7.30   |               |   |   | 2,721,397 |   |

|   |   | The      weighted average fair value at grant date of options outstanding as of      September 30, 2009 was $0.71.                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | Stock-based      compensation expenses for the three months ended September 30, 2009 and      2008 were $155,815 and $277,099 respectively. Stock based compensation      expenses for the nine months ended September 30, 2009 and 2008 were      $572,526 and $828,819 respectively. Stock based compensation expenses for      the period from May 31, 2005 (date of inception) through September 30,      2009 was $7,039,970, of which $3,876,960 was expensed in the acquisition      of a subsidiary and on behalf of deferred compensation on restricted      shares. |

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|                                    |   | %      |   |
|-----------------------------------------|--------|--------|--------|
|                                    |   |   |   |
| Office      furniture and equipment     |   |   | 6      |   |
|                                    |   |   |   |   |
| Laboratory      equipment               |   |   | 15     |   |
|                                    |   |   |   |   |
| Computers      and electronic equipment |   |   | 33     |   |
|                                    |   |   |   |   |
| Leasehold      improvements             |   |   | 25     |   |

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|   | · | internal      costs associated with research and development  activities; |
|--------|--------|---------------------------------------------------------------------------|

|   | · | payments      made to third party contract research organizations, contract      manufacturers, investigative sites, and  consultants; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | manufacturing      development costs; |
|--------|--------|---------------------------------------|

----

|   | · | personnel-related      expenses, including salaries, benefits, travel, and related costs for the      personnel involved in the research and  development; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | activities      relating to the advancement of product candidates through preclinical      studies and clinical trials; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|

|   | · | facilities      and other expenses, which include expenses for rent and maintenance of      facilities, as well as laboratory and other  supplies. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | completion      of such preclinical and clinicaltrials; |
|--------|--------|---------------------------------------------------------|

|   | · | receipt      of necessary regulatory approvals; |
|--------|--------|-------------------------------------------------|

|   | · | the      number of clinical sites included in thetrials; |
|--------|--------|----------------------------------------------------------|

|   | · | the      length of time required to enroll suitable  patients; |
|--------|--------|----------------------------------------------------------------|

|   | · | the      number of patients that ultimately participate in the    trials; |
|--------|--------|---------------------------------------------------------------------------|

|   | · | adverse      medical events or side effects in treated  patients; |
|--------|--------|-------------------------------------------------------------------|

|   | · | lack      of comparability with complementary  technologies; |
|--------|--------|--------------------------------------------------------------|

|   | · | obtaining      capital necessary to fund operations, including the research and      development efforts; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------|

|   | · | the      results of clinical trials. |
|--------|--------|--------------------------------------|

----

|   | · | interest      earned on the Company’s cash and cash  equivalents; |
|--------|--------|-------------------------------------------------------------------------|

|   | · | interest      expense on short term bank credit and loan;and |
|--------|--------|--------------------------------------------------------------|

|   | · | expense      or income resulting from fluctuations of the New Israeli Shekel, which a      portion of the Company’s assets and liabilities are denominated in,      against the United States Dollar and other foreign    currencies. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 31.1 | Certification      of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation S-K      (Filed herewith).     |
|------|------------------------------------------------------------------------------------------------------------------------|
| 31.2 | Certification      of Principal Financial Officer pursuant to Item 601(b)(31) of Regulation      S-K (Filed herewith). |
| 32.1 | Certification      of Chief Executive Officer pursuant to Item 601(b)(32) of Regulation S-K      (Filed herewith).     |
| 32.2 | Certification      of Principal Financial Officer pursuant to Item 601(b)(32) of Regulation      S-B (Filedherewith).  |

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|                   | PROLOR      BIOTECH, INC.    |
|------------------------|------------------------------|
|                   |                         |
| November      13, 2009 | /s/ Abraham Havron           |
| Date                   | Abraham      Havron          |
|                   | Chief      Executive Officer |

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