|            Nevada            |   |    20-0854033    |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|
| (State      or other jurisdiction of incorporation or    organization)                                                                |   | (I.R.S.      Employer Identification No.)      |
|                                                                                                                                       |   |                                           |
| 3      Sapir Street, Weizmann Science Park                                                                                                 |   |                                           |
| Nes-Ziona,      Israel                                                                                                                     |   |   74140                    |
| (Address      of principal executive offices)                                                                                              |   | (Zip      Code)                                |

| Large      accelerated filer o           |                                               | Accelerated      Filer o         |
|------------------------------------------|----------------------------------------------------|----------------------------------|
| Non-accelerated      filer   o | (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      4.  | 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.  | (Removed      and Reserved)                                                              | 24     |
|          |                                                                                     |   |
| ITEM      5.  | Other      Information.                                                                  | 24     |
|          |                                                                                     |   |
| ITEM      6.  | Exhibits.                                                                                | 24     |
|          |                                                                                     |   |
| SIGNATURES    |                                                                                     | 25     |
|          |                                                                                     |   |
| CERTIFICATION | 26                                                                                       |

----

| PART      I   | –      FINANCIAL INFORMATION |
|-------------------------|------------------------------------|
|                    |                               |

| ITEM      1.   | Financial      Statements. |
|--------------------------|----------------------------|

|                                                                                                                                                                                                                                   |   | September      30, 2010 |        |   | December      31, 2009 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|-------------|--------|------------------------|--------|
|                                                                                                                                                                                                                                   |   | (Unaudited)             |        |   |                   |   |
| ASSETS                                                                                                                                                                                                                                 |   |                    |        |   |                   |   |
| Current      Assets:                                                                                                                                                                                                                   |   |                    |        |   |                   |   |
| Cash      and cash equivalents                                                                                                                                                                                                         |   | $                       | 16,461,208  |   |                   | $      | 3,521,866 |   |
| Short      term deposits                                                                                                                                                                                                               |   |                    | 8,375,086   |   |                   |   | - |   |
| Accounts      receivable and prepaid expenses                                                                                                                                                                                          |   |                    | 484,924     |   |                   |   | 85,280 |   |
| Restricted      cash                                                                                                                                                                                                                   |   |                    | 99,674      |   |                   |   | 91,730 |   |
| Total      Current Assets                                                                                                                                                                                                              |   |                    | 25,420,892  |   |                   |   | 3,698,876 |   |
|                                                                                                                                                                                                                                   |   |                    |        |   |                   |   |   |   |
| Long-term      Assets:                                                                                                                                                                                                                 |   |                    |        |   |                   |   |   |   |
| Property      and equipment, net                                                                                                                                                                                                       |   |                    | 299,288     |   |                   |   | 284,315 |   |
| Severance      pay fund                                                                                                                                                                                                                |   |                    | 168,043     |   |                   |   | 124,324 |   |
| Long      term deposit                                                                                                                                                                                                                 |   |                    | 2,247       |   |                   |   | 1,906 |   |
| Total      Long Term Assets                                                                                                                                                                                                            |   |                    | 469,578     |   |                   |   | 410,545 |   |
|                                                                                                                                                                                                                                   |   |                    |        |   |                   |   |   |   |
| Total      Assets                                                                                                                                                                                                                      |   | $                       | 25,890,470  |   |                   | $      | 4,109,421 |   |
|  LIABILITIES      AND SHAREHOLDERS' EQUITY                                                                                                                                                                                        |   |                    |        |   |                   |   |   |   |
| Current      Liabilities:                                                                                                                                                                                                              |   |                    |        |   |                   |   |   |   |
| Trade      payables                                                                                                                                                                                                                    |   | $                       | 140,628     |   |                   | $      | 131,924 |   |
| Related      party  payables                                                                                                                                                                                                 |   |                    | 54,873      |   |                   |   | 203,583 |   |
| Accrued      expenses and other liabilities                                                                                                                                                                                            |   |                    | 598,921     |   |                   |   | 504,612 |   |
| Total      Current Liabilities                                                                                                                                                                                                         |   |                    | 794,422     |   |                   |   | 840,119 |   |
|                                                                                                                                                                                                                                   |   |                    |        |   |                   |   |   |   |
| Accrued      Severance Pay                                                                                                                                                                                                             |   |                    | 200,382     |   |                   |   | 140,237 |   |
|                                                                                                                                                                                                                                   |   |                    |        |   |                   |   |   |   |
| Commitments      and Contingent Liabilities                                                                                                                                                                                            |   |                    |        |   |                   |   |   |   |
| Shareholders'      Equity:                                                                                                                                                                                                             |   |                    |        |   |                   |   |   |   |
| Stock      capital -                                                                                                                                                                                                                   |   |                    |        |   |                   |   |   |   |
| Preferred      stock of $ 0.00001 par value –10,000,000      shares of preferred stock authorized, none and 1,800,000 issued and      outstanding as of September 30, 2010 and December 31, 2009,      respectively.             |   |                    | -           |   |                   |   | 18 |   |
| Common      Stock of $ 0.00001 par value –300,000,000      shares of Common Stock authorized53,445,536      and 35,569,028      shares issued and outstanding as of September 30, 2010 and December      31, 2009, respectively. |   |                    | 534         |   |                   |   | 355 |   |
| Additional      paid-in capital                                                                                                                                                                                                        |   |                    | 56,593,823  |   |                   |   | 30,153,517 |   |
| (Deficit)      accumulated during the development stage                                                                                                                                                                                |   |                    | (31,698,691 | )      |                   |   | (27,024,825 | ) |
| Total      Shareholders' Equity                                                                                                                                                                                                        |   |                    | 24,895,666  |   |                   |   | 3,129,065 |   |
|                                                                                                                                                                                                                                   |   |                    |        |   |                   |   |   |   |
| Total      Liabilities and Shareholders' Equity                                                                                                                                                                                        |   | $                       | 25,890,470  |   |                   | $      | 4,109,421 |   |

----

|                                               |   | For      the three months endedSeptember      30, |       |   | For      the nine months endedSeptember      30, |   |         | Period      from May 31, 2005(date of      inception)to September      30, |   |
|----------------------------------------------------|--------|---------------------------------------------------|------------|--------|--------------------------------------------------|--------|--------------|----------------------------------------------------------------------------|--------|
|                                               |   | 2010                                              |       |   | 2009                                             |   |         | 2010                                                                       |   |   | 2009 |   |   | 2010 |   |
|                                               |   |                                              |       |   |                                             |   |         |                                                                       |   |   |   |   |   |   |   |
| Revenues                                           |   | $                                                 | -          |   |                                             | $      | -            |                                                                       |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|                                               |   |                                              |       |   |                                             |   |         |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      expenses:                           |   |                                              |       |   |                                             |   |         |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| In-process      research and development write-off |   |                                              | -          |   |                                             |   | -            |                                                                       |   |   | - |   |   |   | - |   |   |   | 3,222,831 |   |
| Research      and development, net                 |   |                                              | 1,110,317  |   |                                             |   | 575,917      |                                                                       |   |   | 2,958,073 |   |   |   | 3,466,320 |   |   |   | 16,058,831 |   |
| General      and administrative                    |   |                                              | 645,112    |   |                                             |   | 401,868      |                                                                       |   |   | 1,773,241 |   |   |   | 1,374,910 |   |   |   | 12,992,767 |   |
| Total      operating expenses                      |   |                                              | 1,755,429  |   |                                             |   | 977,785      |                                                                       |   |   | 4,731,317 |   |   |   | 4,841,230 |   |   |   | 32,274,429 |   |
|                                               |   |                                              |       |   |                                             |   |         |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      (loss)                              |   |                                              | (1,755,429 | )      |                                             |   | (977,785     | )                                                                          |   |   | (4,731,314 | ) |   |   | (4,841,230 | ) |   |   | (32,274,429 | ) |
|                                               |   |                                              |       |   |                                             |   |         |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial      income                              |   |                                              | 364,538    |   |                                             |   | 73,256       |                                                                       |   |   | 57,448 |   |   |   | 101,234 |   |   |   | 934,694 |   |
| Financial      (expenses)                          |   |                                              | -          |   |                                             |   | ( 1,041 | )                                                                          |   |   | - |   |   |   | (100,667 | ) |   |   | (358,956 | ) |
|                                               |   |                                              |       |   |                                             |   |         |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      (loss)                                    |   | $                                                 | (1,390,891 | )      |                                             | $      | (905,570     | )                                                                          |   | $ | (4,673,866 | ) |   | $ | (4,840,663 | ) |   | $ | (31,698,691 | ) |
|                                               |   |                                              |       |   |                                             |   |         |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               |   |                                              |       |   |                                             |   |         |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               |   |                                              |       |   |                                             |   |         |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               |   |                                              |       |   |                                             |   |         |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss)      per share (basic & diluted)        |   | $                                                 | (0.03      | )      |                                             | $      | (0.03        | )                                                                          |   | $ | (0.12 | ) |   | $ | (0.14 | ) |   | $ | (1.13 | ) |
|                                               |   |                                              |       |   |                                             |   |         |                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average number of shares outstanding |   |                                              | 42,931,281 |   |                                             |   | 35,549,028   |                                                                       |   |   | 39,027,340 |   |   |   | 35,549,028 |   |   |   | 28,018,313 |   |

----

|                                                               |   | For      the nine months ended September 30, |       |   | Period      from May 31, 2005(date of      inception)to September      30, |   |
|--------------------------------------------------------------------|--------|----------------------------------------------|------------|--------|----------------------------------------------------------------------------|--------|
|                                                               |   | 2010                                         |       |   | 2009                                                                       |   |   | 2010 |   |
| Cash flows from      operating activities                          |   |                                         |       |   |                                                                       |   |   |   |   |
| Net      (loss)                                                    |   | $                                            | (4,673,866 | )      |                                                                       | $      | (4,840,663 | ) |   | $ | (31,698,691 | ) |
| Adjustments      to reconcile net (loss) to net cash (used in)     |   |                                         |       |   |                                                                       |   |   |   |   |   |   |   |
| operating      activities:                                         |
| Depreciation                                                       |   |                                         | 62,800     |   |                                                                       |   | 58,112 |   |   |   | 261,742 |   |
| In-process      research and development write-off                 |   |                                         | -          |   |                                                                       |   | - |   |   |   | 3,222,831 |   |
| Stock      based compensation                                      |   |                                         | 677,257    |   |                                                                       |   | 572,526 |   |   |   | 7,873,042 |   |
| Increase      (decrease) in accrued severance pay, net             |   |                                         | 16,426     |   |                                                                       |   | (384 | ) |   |   | 32,339 |   |
| (Increase)      in accounts receivable and prepaid expenses        |   |                                         | (399,644   | )      |                                                                       |   | (690,919 | ) |   |   | (484,647 | ) |
| Increase      in trade payables                                    |   |                                         | 8,704      |   |                                                                       |   | 15,807 |   |   |   | 130,524 |   |
| Increase      (decrease) in related parties                        |   |                                         | (148,710   | )      |                                                                       |   | (5,462 | ) |   |   | 54,873 |   |
| Long      term deposit exchange rate differences                   |   |                                         | (22        | )      |                                                                       |   | - |   |   |   | (44 | ) |
| Increase (decrease)      in accrued expenses and other liabilities |   |                                         | 94,309     |   |                                                                       |   | 57,981 |   |   |   | 477,905 |   |
| Net      cash (used in) operating activities                       |   |                                         | (4,362,746 | )      |                                                                       |   | (4,833,002 | ) |   |   | (20,130,126 | ) |
|                                                               |   |                                         |       |   |                                                                       |   |   |   |   |   |   |   |
| Cash flows from      investing activities                          |   |                                         |       |   |                                                                       |   |   |   |   |   |   |   |
| Purchase      of property and equipment                            |   |                                         | (77,773    | )      |                                                                       |   | (46,840 | ) |   |   | (546,674 | ) |
| Payment      for the acquisition of ModigeneTech      Ltd.         |   |                                         | -          |   |                                                                       |   | - |   |   |   | (474,837 | ) |
| Long      term deposit                                             |   |                                         | (319       | )      |                                                                       |   | (23 | ) |   |   | (2,203 | ) |
| Short      term deposit                                            |   |                                         | (8,375,086 | )      |                                                                       |   | - |   |   |   | (8,375,086 | ) |
| Restricted      deposit                                            |   |                                         | (7,944     | )      |                                                                       |   | (1,066 | ) |   |   | (99,674 | ) |
| Net      cash (used in) investing activities                       |   |                                         | (8,461,122 | )      |                                                                       |   | (47,929 | ) |   |   | (9,498,474 | ) |
|                                                               |   |                                         |       |   |                                                                       |   |   |   |   |   |   |   |
| Cash flows from      financing activities                          |   |                                         |       |   |                                                                       |   |   |   |   |   |   |   |
| Short      term bank credit                                        |   |                                         | -          |   |                                                                       |   | - |   |   |   | (2,841 | ) |
| Proceeds      from loans                                           |   |                                         | -          |   |                                                                       |   | - |   |   |   | (173,000 | ) |
| Principal      payment of loans                                    |   |                                         | -          |   |                                                                       |   | - |   |   |   | 173,000 |   |
| Proceeds      from issuance of shares                              |   |                                         | 24,145,241 |   |                                                                       |   | 1,996,000 |   |   |   | 44,456,998 |   |
| Proceeds      from warrants and stock options exercise             |   |                                         | 1,617,969  |   |                                                                       |   | - |   |   |   | 1,635,651 |   |
| Net      cash provided by financing activities                     |   |                                         | 25,763,210 |   |                                                                       |   | 1,996,000 |   |   |   | 46,089,808 |   |
| Increase      (decrease) in cash and cash equivalents              |   |                                         | 12,939,342 |   |                                                                       |   | (2,884,931 | ) |   |   | 16,461,208 |   |
| Cash      and cash equivalents at the beginning of the period      |   |                                         | 3,521,866  |   |                                                                       |   | 7,465,232 |   |   |   | - |   |
| Cash      and cash equivalents at the end of the period            |   | $                                            | 16,461,208 |   |                                                                       | $      | 4,580,301 |   |   | $ | 16,461,208 |   |
|                                                               |   |                                         |       |   |                                                                       |   |   |   |   |   |   |   |

----

|                                                 |   | For      the nine months ended September 30,  |    |   | Period      from May 31, 2005 (date of      inception)to September 30,  |   |
|------------------------------------------------------|--------|----------------------------------------------------|---------|--------|-----------------------------------------------------------------------------------|--------|
| Non      cash transactions:                          |   | 2010                                          |    |   | 2009                                                                         |   |   | 2010  |   |
|                                                 |   |                                               |    |   |                                                                              |   |   |   |   |
| Employee      options exercised into shares          |   | $                                                  | -       |   |                                                                              | $      | - |   |   | $ | 140 |   |
| Issuance      of Common Stock in reverse acquisition |   | $                                                  | -       |   |                                                                              | $      | - |   |   | $ | 73 |   |
| Conversion      of preferred stock to Common Stock   |   | $                                                  | 18      |   |                                                                              | $      | - |   |   | $ | 18 |   |
| Cashless      exercise of outstanding warrants       |   | $                                                  | 871,278 |   |                                                                              | $      | - |   |   | $ | 871,278 |   |
|                                                 |   |                                               |    |   |                                                                              |   |   |   |   |   |   |   |
|                                                 |   |                                               |    |   |                                                                              |   |   |   |   |   |   |   |
| Additional      information:                         |   |                                               |    |   |                                                                              |   |   |   |   |   |   |   |
|                                                 |   |                                               |    |   |                                                                              |   |   |   |   |   |   |   |
| Cash      paid for income taxes                      |   | $                                                  | -       |   |                                                                              | $      | - |   |   | $ | - |   |
| Cash      paid for interest expense                  |   | $                                                  | 9       |   |                                                                              | $      | 59 |   |   | $ | 353,733 |   |

----

| 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-lives, through its      subsidiaries, Modigene Inc., a Delaware-based subsidiary, and ModigeneTech      Ltd., an Israeli-based subsidiary. |
|          |    |
|          | b.      | The      Company is devoting substantially all of its efforts toward 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 $31,698,691 as of      September 30, 2010. There is no assurance that profitable operations, if      ever achieved, could be sustained on a continuing basis. The Company      believes that its current cash resources will enable the continuance of      the Company’s activities for at least the next twelve months with no need      for additional financing. |
|          |    |
|          | c.      | On      March 11, 2010 and March 17, 2010, the Company entered into two      substantially identical securities purchase agreements with certain      private investors (the “Investors”), pursuant to which the Investors      agreed to purchase an aggregate of 10,382,975 shares (the “Shares”) of      Common Stock at a purchase price of $2.35 per Share. On March 17, 2010,      the Company closed on the issuance of the Shares for aggregate      consideration of $24,145,241 ($24,399,991 net of $254,750 issuing      expenses). The      Company issued the Shares in reliance upon the exemption from registration      provided by Section 4(2) of the Securities Act of 1933, as amended (the      “Securities Act”), and Rule 506 of Regulation D promulgated thereunder.      Each Investor represented to the Company that such person was an      “accredited investor” as defined in Rule 501(a) under the Securities Act      and that such Investor’s Shares were being acquired for investment      purposes.  The      Shares have not been registered under the Securities Act and are      “restricted securities” as that term is defined by Rule 144 under the      Securities Act. The Company has not undertaken to register the Shares, and      no registration rights have been granted to the Investors in respect of      the Shares. Additionally, each Investor entered into a lockup agreement in      respect of the Shares, pursuant to which such Investor may not sell or      otherwise transfer such Shares for a period of oneyear. |
|          |    |   |
|          | d.      | On      May 20, 2010, all 1,000,000 issued and outstanding shares of Series B      Preferred Stock were converted into 2,167,780 shares of Common      Stock. On      May 21, 2010 all 800,000 issued and outstanding shares of Series A      Preferred Stock were converted into 4,000,000 shares of Common      Stock. No      shares of the Company’s preferred stock were outstanding as of September      30, 2010. |

----

| NOTE      2:- | SIGNIFICANT      ACCOUNTING POLICIES |
|---------------|--------------------------------------|
|          |                                 |
|          | a.                                   | Basis      of presentation: |
|          |                                 |   |
|          |                                 | The      accompanying unaudited financial statements of the Company are presented      in accordance with the requirements of 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 Securities and Exchange      Commission (“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 Company’s audited financial statements for the year      ended December 31, 2009 and the notes thereto included in the Company’s      Annual Report on Form 10-K filed with the SEC on March 26,      2010. |
|          |                                 |   |
|          | 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. |
|          |                                 |   |
|          | c.                                   | Loss      per share: |
|          |                                 |   |
|          |                                 | Basic      and diluted losses per share are presented in accordance with ASC No. 260      “Earnings per share.” Outstanding share options and warrants, convertible      preferred stock and restricted stock have been excluded from the      calculation of the diluted loss per share because all such securities are      antidilutive. The      number of shares of Common Stock issuable upon exercise or conversion of      the foregoing securities that has been excluded from calculations for the      three months ended September 30, 2010 and 2009 and the period from May 31,      2005 (date of inception) to September 30, 2010 was 17,877,596, 9,420,772           and      7,072,495, respectively. The number of shares of Common Stock issuable      excluded from calculations for the nine months ended September 30, 2010      and 2009 was 16,664,421 and 9,372,821, respectively. |
|          |                                 |   |
|          | d.                                   | Fair      value measurements: |
|          |                                 |   |
|          |                                 | As      defined in ASC 820-10, Fair Value Measurements and Disclosures (“ASC      820-10”), fair value is based on the price that would be received to sell      an asset or paid to transfer a liability in an orderly transaction between      market participants at the measurement date. ASC 820-10 establishes a fair      value hierarchy that prioritizes observable and unobservable inputs used      to measure fair value into three broad levels, which are described      below: Level 1:      Quoted prices (unadjusted) in active markets that are accessible at the      measurement date for assets or liabilities. The fair value hierarchy gives      the highest priority to Level 1inputs. |

----

| NOTE      2:- | SIGNIFICANT ACCOUNTING      POLICIES (continued): |
|---------------|---------------------------------------------------|
|          |                                              |
|          | d.                                                | Fair value measurements      (continued): |
|          |                                              |   |
|          |                                              | Level 2:      Other inputs that are observable, directly or indirectly, such as quoted      prices for similar assets and liabilities or market corroborated      inputs. Level 3:      Unobservable inputs are used when little or no market data is available,      which requires the Company to develop its own assumptions about how market      participants would value the assets or liabilities. The fair value      hierarchy gives the lowest priority to Level 3 inputs. In      determining fair value, the Company utilizes valuation techniques in its      assessment that maximize the use of observable inputs and minimize the use      of unobservable inputs. The      following table presents the Company’s financial assets and liabilities      that are carried at fair value, classified according to the three      categories described above: |

|                            |   | Fair      Value Measurements at September  30, 2010 |       |
|---------------------------------|--------|----------------------------------------------------------|------------|
|                            |   |                                                     |       |   | Quoted      Prices in ActiveMarkets for      Identical Assets |   |   | Significant      OtherObservable      Inputs |   |   | SignificantUnobservable      Inputs |   |
|                            |   | Total                                                    |       |   | (Level      1) |   |   | (Level      2) |   |   | (Level      3) |   |
|                            |   |                                                     |       |   |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents  |   | $                                                        | 16,461,208 |   |   | $ | 16,461,208 |   |   | $ | - |   |   | $ | - |   |
| Short      term deposits        |   |                                                     | 8,375,086  |   |   |   | 8,375,086 |   |   |   | - |   |   |   | - |   |
| Restricted      cash            |   |                                                     | 99,674     |   |   |   | 99,674 |   |   |   | - |   |   |   | - |   |
| Total      assets at fair value |   | $                                                        | 24,935,968 |   |   | $ | 24,935,968 |   |   | $ | - |   |   | $ | - |   |

|                            |   | Fair      Value Measurements at December 31, 2009 |      |
|---------------------------------|--------|--------------------------------------------------------|-----------|
|                            |   |                                                   |      |   | Quoted      Prices in ActiveMarkets for      Identical Assets |   |   | Significant      OtherObservable      Inputs |   |   | SignificantUnobservable      Inputs |   |
|                            |   | Total                                                  |      |   | (Level      1) |   |   | (Level      2) |   |   | (Level      3) |   |
|                            |   |                                                   |      |   |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents  |   | $                                                      | 3,521,866 |   |   | $ | 3,521,866 |   |   | $ | - |   |   | $ | - |   |
| Restricted      cash            |   |                                                   | 91,730    |   |   |   | 91,730 |   |   |   | - |   |   |   | - |   |
| Total      assets at fair value |   | $                                                      | 3,613,596 |   |   | $ | 3,613,596 |   |   | $ | - |   |   | $ | - |   |

----

| NOTE      3:- | RECENT      ACCOUNTING  PRONOUNCEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|          | In      April 2010, the FASB issued Accounting Standards Update No. 2010-17 (“ASU      2010-17”), Revenue Recognition-Milestone Method (Topic 605): Milestone      Method of Revenue Recognition. The amendments in ASU 2010-17 are effective      on a prospective basis for milestones achieved in fiscal years, and      interim periods within those years, beginning on or after June 15,      2010. Early adoption is permitted. The Company does not expect the      provisions of ASU 2010-17 to have a material effect on its financial      statements In      April 2010, the FASB issued Accounting Standards Update No. 2010-13      (“ASU 2010-13”), Compensation—Stock Compensation (Topic 718), which      clarifies the classification of an employee share-based payment award with      an exercise price denominated in the currency of a market in which the      underlying security trades. ASU 2010-13 will be effective for the      first fiscal quarter beginning after December 15, 2010, with early      adoption permitted. The Company does not expect the provisions of ASU      2010-13 to have a material effect on its financialstatements. In      February 2010, the FASB issued Accounting Standards Update No. 2010-09      (“ASU 2010-09”), Subsequent Events (Topic 855) regarding subsequent events      and amendments to certain recognition and disclosure requirements. Under      ASU 2010-09, a public company that is an SEC filer, as defined therein, is      not required to disclose the date through which subsequent events have      been evaluated. ASU 2010-09 was effective upon issuance. The adoption of      this ASU 2010-09 did not have a material impact on the Company's financial      statements. In      January 2010, the FASB issued Accounting Standards Update No. 2010-06      (“ASU 2010-06”), Fair Value Measurements and Disclosures (Topic 820),      regarding fair value measurements and disclosures and improvement in the      disclosure about fair value measurements. ASU 2010-06 requires additional      disclosures regarding significant transfers in and out of Levels 1 and 2      of fair value measurements, including a description of the reasons for the      transfers.  Further, this ASU 2010-06 requires additional      disclosures for the activity in Level 3 fair value measurements, requiring      presentation of information about purchases, sales, issuances and      settlements in the reconciliation for fair value measurements. ASU 2010-06      is effective for fiscal years beginning after December 15, 2010, and for      interim periods within those fiscal years. The Company is currently      evaluating the impact of ASU 2010-06; however, the Company does not expect      that its adoption will have a material impact on its financial      statements. There      were other updates recently issued, most of which represented technical      corrections to the accounting literature or application to specific      industries and are not expected to a have a material impact on the      Company’s consolidated financial position, results of operations or cash      flows. |

----

| NOTE      4:- | EMPLOYEES'      STOCK OPTION PLANS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|          | The      Company issued stock options to purchase shares of Common Stock under the      Company’s 2005 Stock Incentive Plan (the “2005 Plan”) and the Company’s      2007 Equity Incentive Plan (the “2007 Plan”).  The      Company accounts for stock-based compensation using the fair value      recognition provisions of ASC No. 718 “Compensation – stock      compensation.”  The fair value of each stock option is      calculated based upon grant date fair value using the Black-Scholes      option-pricing model using the following weighted average      assumptions: |

|                             |   | Options      granted under 2005 & 2007 Plan in the nine months      ended |   |   | Options      granted under 2007 Plan in the ninemonths    ended |   |
|----------------------------------|--------|-------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------|--------|
|                             |   | September      30, 2009                                                       |   |   | September 30,      2010                                         |   |
| annual      dividends of         |   | $                                                                             | 0.00   |   |                                                            | $      | 0.00 |   |
| expected      volatility of      |   |                                                                          | 116.72 | %      |                                                            |   | 104.45 | % |
| risk-free      interest rate of  |   |                                                                          | 0.01   | %      |                                                            |   | 0.30 | % |
| expected      options expiration |   |                                                                          | 5      |   |                                                            |   | 7 |   |

|   | The      fair value of stock options granted in the nine months      ended  September 30, 2010 and 2009 were $1,101,100      and  $131,342, respectively. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                          |
|   | The      following is a summary of the stock options granted under the 2005 and      2007 Plans:                                                                              |

|                                            |   | For      the nine months ended |      |
|-------------------------------------------------|--------|--------------------------------|-----------|
|                                            |   | September      30, 2010        |      |
|                                            |   | Numberof      Options          |      |   | Weighted      Average Exercise Price |   |
|                                            |   |                           |      |   |   |   |
| Outstanding      at the beginning of the period |   |                           | 4,785,439 |   |   | $ | 1.11 |   |
| Exercised                                       |   |                           | (555,130  | ) |   | $ | 1.48 |   |
| Forfeited                                       |   |                           | (106,468  | ) |   | $ | 2.24 |   |
| Issued      under the 2007 plan                 |   |                           | 500,000   |   |   | $ | 2.40 |   |
| Issued      under the 2007 plan                 |   |                           | 50,000    |   |   | $ | 2.35 |   |
| Outstanding      at the end of the period       |   |                           | 4,673,841 |   |   | $ | 1.29 |   |
|                                            |   |                           |      |   |   |   |   |   |
| Options      exercisable                        |   |                           | 2,903,673 |   |   | $ | 1.14 |   |

----

| NOTE      4:- | EMPLOYEES'      STOCK OPTION PLANS (continued) |
|---------------|------------------------------------------------|

|                                            |   | For      the nine months ended |      |
|-------------------------------------------------|--------|--------------------------------|-----------|
|                                            |   | September      30, 2009        |      |
|                                            |   | Numberof      Options          |      |   | Weighted      Average Exercise 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 |   |

| The      options outstanding as of September 30, 2010 have been separated into      exercise prices, as follows: |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                  |   |
|                                                                                                                  |   |   |   |   |   | Remaining      Weighted Average |   |   |   |   |
| Exercise      Price                                                                                                   |   |   | Options      Outstanding |   |   | Contractual      Life (years) |   |   | Options      Exercisable |   |
| $                                                                                                                     | 0.650  |   |   |   | 375,000 |   |   |   | 8.35 |   |   |   | 182,083 |   |
| $                                                                                                                     | 0.879  |   |   |   | 984,401 |   |   |   | 5.52 |   |   |   | 984,401 |   |
| $                                                                                                                     | 0.900  |   |   |   | 1,950,000 |   |   |   | 7.42 |   |   |   | 975,000 |   |
| $                                                                                                                     | 0.930  |   |   |   | 25,000 |   |   |   | 7.43 |   |   |   | 16,667 |   |
| $                                                                                                                     | 1.318  |   |   |   | 119,452 |   |   |   | 5.83 |   |   |   | 119,452 |   |
| $                                                                                                                     | 1.500  |   |   |   | 121,169 |   |   |   | 7.57 |   |   |   | 77,251 |   |
| $                                                                                                                     | 2.000  |   |   |   | 425,000 |   |   |   | 6.61 |   |   |   | 425,000 |   |
| $                                                                                                                     | 2.500  |   |   |   | 123,819 |   |   |   | 2.69 |   |   |   | 123,819 |   |
| $                                                                                                                     | 2.350  |   |   |   | 50,000 |   |   |   | 9.27 |   |   |   | - |   |
| $                                                                                                                     | 2.400  |   |   |   | 500,000 |   |   |   | 9.29 |   |   |   | - |   |
|                                                                                                                  |   |   |   |   | 4,673,841 |   |   |   |   |   |   |   | 2,903,673 |   |
|                                                                                                                  |   |

----

| NOTE      4:- | EMPLOYEES'      STOCK OPTION PLANS (continued)                                                                                                                                 |
|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |                                                                                                                                                                           |
|          | Weighted      average fair values and average exercise prices of options at date of      grant and total aggregate intrinsic value of outstanding options are as      follows: |

|                                              |   | September      30, |       |   | December      31, |   |
|---------------------------------------------------|--------|--------------------|------------|--------|-------------------|--------|
|                                              |   | 2010               |       |   | 2009              |   |
| Weighted      average fair value on date of grant |   | $                  | 0.77       |   |              | $      | 0.71 |   |
| Total      aggregate intrinsic value              |   | $                  | 25,414,677 |   |              | $      | 6,556,831 |   |

|   |   | Stock-based      compensation expense for the three months ended September 30, 2010 and      2009 and for the period from May 31, 2005 (date of inception) to September      30, 2010 was $208,785, $155,815 and $7,873,042, respectively. Stock-based      compensation expense for the nine months ended September 30, 2010 and 2009      was $677,257      and $572,526,      respectively. Stock-based      compensation expense for the period from May 31, 2005 (date of inception)      through September 30, 2010 includes $3,876,960 expensed in the acquisition      of a subsidiary and on behalf of deferred compensation on restricted      shares. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| NOTE      5:- | STOCK      WARRANTS |
|---------------|---------------------|

|                                                            |   | For      the nine months ended |       |
|-----------------------------------------------------------------|--------|--------------------------------|------------|
|                                                            |   | September 30,      2010   |       |
|                                                            |   | Numberof      warrants         |       |   | Weighted      Average Exercise Price |   |
|                                                            |   |                           |       |   |   |   |
| Outstanding      and exercisable at the beginning of the period |   |                           | 3,558,924  |   |   | $ | 2.18 |   |
| Exercised                                                       |   |                           | (1,004,116 | ) |   | $ | 2.21 |   |
| Outstanding      and exercisable at the end of the period       |   |                           | 2,554,808  |   |   | $ | 2.17 |   |

|   |   | Proceeds      from exercise of 1,000,116 warrants into 770,634 shares in the nine months      ended September 30, 2010 were $795,833. Total aggregate intrinsic value      of warrants outstanding as of September 30, 2010 was      $9,810,808. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| NOTE      6:- | SUBSEQUENT      EVENTS                                                                                                                                                                                                                                                                                                                                                                                                          |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |                                                                                                                                                                                                                                                                                                                                                                                                                            |
|          | As      defined in FASB ASC 855-10, “Subsequent Events”, subsequent events are      events or transactions that occur after the balance sheet date but before      financial statements are issued or available to be issued. Subsequent      to September 30, 2010 and through November 3, 2010, 12,707 new common      shares were issued in connection with the exercise of outstanding      warrants. |

----

| ITEM      2.   | Management’s      Discussion and Analysis of Financial Condition and Results of      Operations. |
|--------------------------|--------------------------------------------------------------------------------------------------------|

The following discussion should be read in conjunction with theconsolidated financial statements and the related notes thereto that appear inItem 1 of this Quarterly Report on Form 10-Q.

----

| ·   | significant      reduction in the number of injections required to achieve the same or      superior therapeutic effect from the same dosage; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|
|               |                                                                                                                                          |

| ·   | extended      patent protection for proprietary new formulations of existing      therapies; |
|--------------------|----------------------------------------------------------------------------------------------|
|               |                                                                                         |

| ·   | faster      commercialization with greater chance of success and lower costs than      those typically associated with a new therapeutic protein;    and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|
|               |                                                                                                                                                     |

| ·   | manufacturing      using industry-standard biotechnology-based protein production      processes. |
|--------------------|---------------------------------------------------------------------------------------------------|

| ·   | Human      Growth Hormone (hGH) |
|--------------------|---------------------------------|
|               |                            |

| ·   | Interferon      β |
|--------------------|------------------------|
|               |                   |

| ·   | Factor      VIIa, Factor IX |
|--------------------|-----------------------------|
|               |                        |

| ·   | Erythropoietin      (EPO) |
|--------------------|---------------------------|
|               |                      |

| ·   | Anti-Obesity      Peptide |
|--------------------|---------------------------|
|               |                      |

| ·   | Glucagon-Like      Peptide-1 (GLP-1) |
|--------------------|--------------------------------------|
|               |                                 |

----

----

| ·   | 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. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|               |                                                                                                                                              |

These costs and expenses are partially funded by grants receivedby the Company from the OCS. There can be no assurance that the Company willcontinue to receive grants from the OCS in amounts sufficient for itsoperations, if at all.

----

| ·   | completion      of such preclinical and clinical trials; |
|--------------------|----------------------------------------------------------|
|               |                                                     |

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

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

| ·   | 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 research and development      efforts; and |
|--------------------|-----------------------------------------------------------------------------------------------------------|
|               |                                                                                                      |

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

----

Financial Expense and Income

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

| ·   | interest      expenses on short term bank credit; and |
|--------------------|-------------------------------------------------------|
|               |                                                  |

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

----

 candidates, we are unableto estimate the amounts of increased capital outlays and operating expendituresassociated with our current and anticipated clinical trials. Our future capitalrequirements will depend on many factors, including the progress and results ofour clinical trials, the duration and cost of discovery and preclinicaldevelopment, and laboratory testing and clinical trials for our productcandidates, the timing and outcome of regulatory review of our productcandidates, the number and development requirements of other product candidatesthat we pursue, and the costs of commercialization activities, including productmarketing, sales and distribution. We do not anticipate that we will generateproduct revenues for at least the next several years. In the absence ofadditional funding, we expect continuing operating losses to result in increasesin our cash used in operations over the next several years. To the extent thatour capital resources are insufficient to meet our future capital requirements,we will need to finance our future cash needs through public or private equityofferings, debt financings or corporate collaboration and licensingarrangements

----

Off-Balance Sheet Arrangements

----

| ITEM      3.   | Quantitative      and Qualitative Disclosures About MarketRisk |
|--------------------------|----------------------------------------------------------------|

| ITEM      4.   | Controls      and Procedures |
|--------------------------|------------------------------|

----

| PART      II   | OTHER      INFORMATION |
|--------------------------|------------------------|
|                     |                   |

| ITEM      1.   | Legal      Proceedings. |
|--------------------------|-------------------------|

| ITEM      1A   | Risk      Factors |
|--------------------------|-------------------|

| ITEM      2.   | Unregistered      Sales of Equity Securities and Use ofProceeds. |
|--------------------------|------------------------------------------------------------------|

| ITEM      3.   | Defaults      Upon Senior Securities. |
|--------------------------|---------------------------------------|

| ITEM      4.   | (Removed      and Reserved). |
|--------------------------|------------------------------|
|                     |                         |

| ITEM      5.   | Other      Information. |
|--------------------------|-------------------------|

| ITEM      6.   | Exhibits. |
|--------------------------|-----------|
|                     |      |

| 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-K (Filed herewith). |

----

|                                                       | PROLOR      BIOTECH, INC. |                         |
|------------------------------------------------------------|---------------------------|------------------------------|
| November      12, 2010       |                      |                         |   |
| Date                                                       |                      | /s/      Abraham Havron      |   |
|                                                       |                      | Abraham      Havron          |   |
|                                                       |                      | Chief      Executive Officer |   |
|                                                       |                      |                         |   |

----