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

----

|          |                                                                                        | Page   |
|---------------|---------------------------------------------------------------------------------------------|--------|
|          |                                                                                        |   |
| PART I        |                                                                                        |   |
|          |                                                                                        |   |
| ITEM 1.       | Financial Statements                                                                        | 3      |
|          |                                                                                        |   |
| ITEM 2.       | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 13     |
|          |                                                                                        |   |
| ITEM 3.       | Quantitative and Qualitative Disclosures About Market Risk                                  | 22     |
|          |                                                                                        |   |
| ITEM 4T.      | Controls and Procedures                                                                     | 22     |
|          |                                                                                        |   |
| PART II       |                                                                                        |   |
|          |                                                                                        |   |
| ITEM 1A       | Risk Factors                                                                                | 23     |
|          |                                                                                        |   |
| ITEM 2.       | Unregistered Sales of Equity Securities and Use of Proceeds                                 | 23     |
|          |                                                                                        |   |
| ITEM 3.       | Defaults Upon Senior Securities                                                             | 23     |
|          |                                                                                        |   |
| ITEM 4.       | (Removed and Reserved)                                                                      | 23     |
|          |                                                                                        |   |
| ITEM 5.       | Other Information                                                                           | 23     |
|          |                                                                                        |   |
| ITEM 6.       | Exhibits                                                                                    | 23     |
|          |                                                                                        |   |
| SIGNATURES    |                                                                                        | 24     |
|          |                                                                                        |   |
| CERTIFICATION |                                                                                        |   |

----

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

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

|                                                                                                                                                                                                                   |               | March 31, 2011 |         |         | December 31, 2010 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|--------------------------|--------------|--------------|-----------------------------|--------|
|                                                                                                                                                                                                                   |               | (Unaudited)              |         |         | (Audited)                   |   |
| ASSETS                                                                                                                                                                                                                 |               |                     |         |         |                        |   |
| Current Assets:                                                                                                                                                                                                        |               |                     |         |         |                        |   |
| Cash and cash equivalents                                                                                                                                                                                              |               | $                        | 22,335,006   |         |                        | $      | 24,474,458 |   |
| Short term deposits                                                                                                                                                                                                    |               |                     | 319,357      |         |                        |   | 1,439,269 |   |
| Accounts receivable and prepaid expenses                                                                                                                                                                               |               |                     | 505,676      |         |                        |   | 642,392 |   |
| Restricted cash                                                                                                                                                                                                        |               |                     | 171,160      |         |                        |   | 102,932 |   |
| Total Current Assets                                                                                                                                                                                                   |               |                     | 23,331,199   |         |                        |   | 26,659,051 |   |
|                                                                                                                                                                                                                   |               |                     |         |         |                        |   |   |   |
| Long-term Assets:                                                                                                                                                                                                      |               |                     |         |         |                        |   |   |   |
| Property and equipment, net                                                                                                                                                                                            |               |                     | 380,470      |         |                        |   | 350,284 |   |
| Severance pay fund                                                                                                                                                                                                     |               |                     | 212,163      |         |                        |   | 193,346 |   |
| Long term deposit                                                                                                                                                                                                      |               |                     | 2,365        |         |                        |   | 2,320 |   |
| Total Long Term Assets                                                                                                                                                                                                 |               |                     | 214,528      |         |                        |   | 545,950 |   |
|                                                                                                                                                                                                                   |               |                     |         |         |                        |   |   |   |
| Total Assets                                                                                                                                                                                                           |               | $                        | 23,926,197   |         |                        | $      | 27,205,001 |   |
|                                                                                                                                                                                                                   |               |                     |         |         |                        |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                                                   |     |                     |    |    |                   |   |   |   |
| Current Liabilities:                                                                                                                                                                                                   |               |                     |         |         |                        |   |   |   |
| Trade payables                                                                                                                                                                                                         |               | $                        | 151,889      |         |                        | $      | 429,063 |   |
| Related parties                                                                                                                                                                                                        |               |                     | 54,853       |         |                        |   | 207,306 |   |
| Accrued expenses and other liabilities                                                                                                                                                                                 |               |                     | 1,309,652    |         |                        |   | 1,353,235 |   |
| Total Current Liabilities                                                                                                                                                                                              |               |                     | 1,516,394    |         |                        |   | 1,989,604 |   |
|                                                                                                                                                                                                                   |               |                     |         |         |                        |   |   |   |
| Liability in Respect of Employees Severance Payments                                                                                                                                                                   |               |                     | 264,529      |         |                        |   | 220,838 |   |
|                                                                                                                                                                                                                   |               |                     |         |         |                        |   |   |   |
| Commitments and Contingent Liabilities                                                                                                                                                                                 |               |                     |         |         |                        |   |   |   |
| Shareholders' Equity:                                                                                                                                                                                                  |               |                     |         |         |                        |   |   |   |
| Stock capital -                                                                                                                                                                                                        |               |                     |         |         |                        |   |   |   |
| Common stock of $ 0.00001 par value – 300,000,000 shares of common stock authorized 54,222,222  and 54,116,628 shares issued and outstanding as of March 31, 2011 and December 31, 2010, respectively. |               |                     | 542          |         |                        |   | 541 |   |
| Additional paid-in capital                                                                                                                                                                                             |               |                     | 60,195,665   |         |                        |   | 59,577,974 |   |
| Deficit accumulated during the development stage                                                                                                                                                                       |               |                     | (38,050,933  | )            |                        |   | (34,583,956 | ) |
| Total Shareholders' Equity                                                                                                                                                                                             |               |                     | 22,145,274   |         |                        |   | 24,994,559 |   |
|                                                                                                                                                                                                                   |               |                     |         |         |                        |   |   |   |
| Total Liabilities and Shareholders' Equity                                                                                                                                                                             |               | $                        | 23,926,197   |         |                        | $      | 27,205,001 |   |

----

|                                          |   |                                           |       |   | Period from May 31, 2005 |   |
|-----------------------------------------------|--------|------------------------------------------------|------------|--------|----------------------------------------------|--------|
|                                          |   | For the three months ended |       |   | (date of inception)                |   |
|                                          |   | March 31,                                 |       |   | to March 31,                       |   |
|                                          |   | 2011                                           |       |   | 2010                                         |   |   | 2011 |   |
|                                          |   |                                           |       |   |                                         |   |   |   |   |
| Revenues                                      |   | $                                              | -          |   |                                         | $      | - |   |   | $ | - |   |
|                                          |   |                                           |       |   |                                         |   |   |   |   |   |   |   |
| Operating expenses:                           |   |                                           |       |   |                                         |   |   |   |   |   |   |   |
| In-process research and development write-off |   |                                           |       |   |                                         |   | - |   |   |   | 3,222,831 |   |
| Research and development, net                 |   |                                           | 3,035,261  |   |                                         |   | 1,002,434 |   |   |   | 21,355,802 |   |
| General and administrative                    |   |                                           | 708,896    |   |                                         |   | 485,493 |   |   |   | 14,385,465 |   |
| Total operating expenses                      |   |                                           | 3,744,157  |   |                                         |   | 1,487,927 |   |   |   | 38,964,098 |   |
|                                          |   |                                           |       |   |                                         |   |   |   |   |   |   |   |
| Operating (loss)                              |   |                                           | (3,744,157 | )      |                                         |   | (1,487,927 | ) |   |   | (38,964,098 | ) |
|                                          |   |                                           |       |   |                                         |   |   |   |   |   |   |   |
| Financial income                              |   |                                           | 277,180    |   |                                         |   | 1,319 |   |   |   | 1,272,121 |   |
| Financial (expenses)                          |   |                                           | -          |   |                                         |   | (67,750 | ) |   |   | (358,956 | ) |
|                                          |   |                                           |       |   |                                         |   |   |   |   |   |   |   |
| Net (loss)                                    |   |                                           | (3,466,977 | )      |                                         |   | (1,554,358 | ) |   |   | (38,050,933 | ) |
|                                          |   |                                           |       |   |                                         |   |   |   |   |   |   |   |
| (Loss) per share (basic & diluted)        |   | $                                              | (0.08      | )      |                                         | $      | (0.04 | ) |   | $ | (1.30 | ) |
|                                          |   |                                           |       |   |                                         |   |   |   |   |   |   |   |
| Weighted average number of shares outstanding |   |                                           | 43,359,771 |   |                                         |   | 35,730,803 |   |   |   | 29,318,741 |   |

----

|                                                                           |   |                                 |       |   | Period from May 31, 2005 |   |
|--------------------------------------------------------------------------------|--------|--------------------------------------|------------|--------|--------------------------|--------|
|                                                                           |   |                                 |       |   | (date of inception)      |   |
|                                                                           |   | For the three months ended March 31, |       |   | to March 31,             |   |
|                                                                           |   | 2011                                 |       |   | 2010                     |   |   | 2011 |   |
| Cash flows from operating activities                                           |   |                                 |       |   |                     |   |   |   |   |
| Net (loss)                                                                     |   | $                                    | (3,466,977 | )      |                     | $      | (1,554,358 | ) |   | $ | (38,050,933 | ) |
| Adjustments to reconcile net (loss) to net cash (used in)operating activities: |   |                                 |       |   |                     |   |   |   |   |   |   |   |
| Depreciation                                                                   |   |                                 | 26,924     |   |                     |   | 20,239 |   |   |   | 312,826 |   |
| In-process research and development write-off                                  |   |                                 | -          |   |                     |   | - |   |   |   | 3,222,831 |   |
| Stock based compensation                                                       |   |                                 | 460,400    |   |                     |   | 200,995 |   |   |   | 8,539,610 |   |
| (Increase) in accounts receivable and prepaid expenses                         |   |                                 | 136,716    |   |                     |   | (463,290) |   |   |   | (505,399) |   |
| Increase (decrease) in accrued severance pay, net                              |   |                                 | 43,691     |   |                     |   | 31,115 |   |   |   | 264,529 |   |
| (Increase) in accounts receivable and prepaid expenses                         |   |                                 | 136,716    |   |                     |   | (463,290 | ) |   |   | (505,399 | ) |
| Increase (decrease) in trade payables                                     |   |                                 | (277,174   | )      |                     |   | 20,586 |   |   |   | 141,785 |   |
| (Decrease) increase in related parties                                         |   |                                 | (152,453   | )      |                     |   | (148,455 | ) |   |   | 54,853 |   |
| Long term deposit exchange rate differences                                    |   |                                 | (45        | )      |                     |   | (22 | ) |   |   | (89 | ) |
| Increase (decrease) in accrued expenses and other liabilities                  |   |                                 | (43,583    | )      |                     |   | 137,785 |   |   |   | 1,188,636 |   |
| Net cash used in operating activities                                          |   |                                 | (3,272,501 | )      |                     |   | (1,755,405 | ) |   |   | (24,831,351 | ) |
|                                                                           |   |                                 |       |   |                     |   |   |   |   |   |   |   |
| Cash flows from investing activities                                           |   |                                 |       |   |                     |   |   |   |   |   |   |   |
| Purchase of property and equipment                                             |   |                                 | (57,110    | )      |                     |   | (16,157 | ) |   |   | (678,940 | ) |
| Payment for the acquisition of ModigeneTech Ltd.                               |   |                                 | -          |   |                     |   | - |   |   |   | (474,837 | ) |
| Assets held for employees’ severance payments                            |   |                                 | (18,817    | )      |                     |   | (13,614 | ) |   |   | (212,163 | ) |
| Long term (deposit)                                                            |   |                                 | -          |   |                     |   | (12 | ) |   |   | (2,276 | ) |
| Short term (deposit) release                                                   |   |                                 | 1,119,912  |   |                     |   | (98,664 | ) |   |   | (319,357 | ) |
| Restricted cash                                                                |   |                                 | (68,228    | )      |                     |   | (4,171 | ) |   |   | (171,160 | ) |
| Net cash (used in) provided by investing activities                            |   |                                 | 975,757    |   |                     |   | (132,618 | ) |   |   | (1,858,733 | ) |
|                                                                           |   |                                 |       |   |                     |   |   |   |   |   |   |   |
| 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                                               |   |                                 | -          |   |                     |   | 24,145,358 |   |   |   | 47,188,418 |   |
| Proceeds from exercise of options                                              |   |                                 | 125,000    |   |                     |   | 213,788 |   |   |   | 1,011,388 |   |
| Proceeds from exercise of warrants                                             |   |                                 | 32,292     |   |                     |   | 126,482 |   |   |   | 828,125 |   |
| Net cash provided by financing activities                                      |   |                                 | 157,292    |   |                     |   | 24,485,628 |   |   |   | 49,025,090 |   |
|                                                                           |   |                                 |       |   |                     |   |   |   |   |   |   |   |
| Increase (decrease) in cash and cash equivalents                               |   |                                 | (2,139,452 | )      |                     |   | 22,597,605 |   |   |   | 22,335,006 |   |
| Cash and cash equivalents at the beginning of the period                       |   |                                 | 24,474,458 |   |                     |   | 3,521,866 |   |   |   | - |   |
| Cash and cash equivalents at the end of the period                             |   | $                                    | 22,335,006 |   |                     | $      | 26,119,471 |   |   | $ | 22,335,006 |   |

----

|                                                                                                            |   |                                                               |   |   | Period from May31, 2005 |   |
|-----------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|--------|----------------------------------------|--------|
|                                                                                                            |   |                                                               |   |   | (date of inception)          |   |
|                                                                                                            |   | For the three months ended March 31, |   |   | to March 31,                 |   |
|                                                                                                            |   | 2011                                                               |   |   | 2010                                   |   |   | 2011 |   |
| Non cash transactions:                                                                                          |   |                                                               |   |   |                                   |   |   |   |   |
|                                                                                                            |   |                                                               |   |   |                                   |   |   |   |   |
| Employee options exercised into shares                                                                          |   | $                                                                  | -      |   |                                   | $      | - |   |   | $ | 140 |   |
| Issuance of common stock in reverse acquisition                                                                 |   | $                                                                  | -      |   |                                   | $      | - |   |   | $ | 73 |   |
| Conversion of preferred stock to common stock                                                                   |   | $                                                                  | -      |   |                                   | $      | - |   |   | $ | 18 |   |
| Cashless exercise of 56,947 outstanding stock warrants and issuance of 42,667 underlying shares of common stock |   | $                                                                  | 1      |   |                                   | $      | - |   |   | $ | 7 |   |
|                                                                                                            |   |                                                               |   |   |                                   |   |   |   |   |   |   |   |
| Additional information:                                                                                         |   |                                                               |   |   |                                   |   |   |   |   |   |   |   |
|                                                                                                            |   |                                                               |   |   |                                   |   |   |   |   |   |   |   |
| Cash paid for income taxes                                                                                      |   | $                                                                  | -      |   |                                   | $      | - |   |   | $ | - |   |
| Cash paid for interest expense                                                                                  |   | $                                                                  | 12     |   |                                   | $      | 4 |   |   | $ | 353,748 |   |

----

| 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 corporation, 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 $38,050,933 as of March 31, 2011. 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 a year with no need for additional financing. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES |
|----------|---------------------------------|

|   | a.  | Basis of presentation: |
|--------|----------|------------------------|

|   | b.  | Principles of 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”. 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 March 31, 2011 and 2010 and the period from May 31, 2005 (date of inception) to March 31, 2011 was 18,450,260, 12,075,765 and 8,013,260, 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 1 inputs. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   | 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 March 31, 2011 |       |
|----------------------------|--------|-------------------------------------------------------------------------|------------|
|                       |   |                                                                    |       |   | Quoted Pricesin Active |   |   | SignificantOther |   |   | Significant |   |
|                       |   |                                                                    |       |   | Markets forIdentical Assets |   |   | ObservableInputs |   |   | UnobservableInputs |   |
|                       |   | Total                                                                   |       |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
|                       |   |                                                                    |       |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents  |   | $                                                                       | 22,335,006 |   |   | $ | 22,335,006 |   |   | $ | - |   |   | $ | - |   |
| Short term deposits        |   |                                                                    | 319,357    |   |   |   | 319,357 |   |   |   | - |   |   |   | - |   |
| Restricted cash            |   |                                                                    | 171,160    |   |   |   | 171,160 |   |   |   | - |   |   |   | - |   |
| Total assets at fair value |   | $                                                                       | 22,825,523 |   |   | $ | 22,825,523 |   |   | $ | - |   |   | $ | - |   |

----

| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (continued): |
|----------|----------------------------------------------|

|   | d. | Fair value measurements:(continued) |
|--------|----|-------------------------------------|

|                       |   | Fair Value Measurements at December 31, 2010 |       |
|----------------------------|--------|----------------------------------------------------------------------------|------------|
|                       |   |                                                                       |       |   | Quoted Prices in Active |   |   | Significant Other |   |   | Significant |   |
|                       |   |                                                                       |       |   | Markets for Identical Assets |   |   | Observable Inputs |   |   | Unobservable Inputs |   |
|                       |   | Total                                                                      |       |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
|                       |   |                                                                       |       |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents  |   | $                                                                          | 24,474,458 |   |   | $ | 24,474,458 |   |   | $ | - |   |   | $ | - |   |
| Short term deposits        |   |                                                                       | 1,439,269  |   |   |   | 1,439,269 |   |   |   |   |   |   |   |   |   |
| Restricted cash            |   |                                                                       | 102,932    |   |   |   | 102,932 |   |   |   | - |   |   |   | - |   |
| Total assets at fair value |   | $                                                                          | 26,016,659 |   |   | $ | 26,016,659 |   |   | $ | - |   |   | $ | - |   |

| NOTE 3:- | RECENT ACCOUNTING  PRONOUNCEMENTS |
|----------|---------------------------------------------|

----

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

|                                       |   | For the three months ended |      |
|--------------------------------------------|--------|------------------------------------------------|-----------|
|                                       |   | March 31, 2011                       |      |
|                                       |   | Number of Options                    |      |   | Weighted AverageExercise Price |   |
|                                       |   |                                           |      |   |   |   |
| Outstanding at the beginning of the period |   |                                           | 5,134,346 |   |   | $ | 1.11 |   |
| Exercised                                  |   |                                           | (50,000   | ) |   | $ | 2.50 |   |
| Forfeited                                  |   |                                           | (5,000    | ) |   | $ | 6.23 |   |
| Issued under the 2007 plan                 |   |                                           | 189,000   |   |   | $ | 6.23 |   |
| Outstanding at the end of the period       |   |                                           | 5,268,346 |   |   | $ | 1.29 |   |
|                                       |   |                                           |      |   |   |   |   |   |
| Options exercisable                        |   |                                           | 3,526,118 |   |   | $ | 1.11 |   |

|                                       |   | For the three months ended |      |
|--------------------------------------------|--------|------------------------------------------------|-----------|
|                                       |   | March 31, 2010                       |      |
|                                       |   | Number of Options                    |      |   | Weighted AverageExercise Price |   |
|                                       |   |                                           |      |   |   |   |
| Outstanding at the beginning of the period |   |                                           | 4,785,439 |   |   | $ | 1.11 |   |
| Exercised                                  |   |                                           | (165,323  | ) |   | $ | 1.29 |   |
| Issued under the 2005 plan                 |   |                                           | 50,000    |   |   | $ | 2.35 |   |
| Issued under the 2007 plan                 |   |                                           | 500,000   |   |   | $ | 2.40 |   |
| Outstanding at the end of the period       |   |                                           | 5,170,116 |   |   | $ | 1.24 |   |
|                                       |   |                                           |      |   |   |   |   |   |
| Options exercisable                        |   |                                           | 2,536,074 |   |   | $ | 1.18 |   |

----

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

|                |   |   |                     |   |      | Remaining Weighted Average |   |   |                     |   |
|---------------------|--------|--------|--------------------------|--------|-----------|--------------------------------------|--------|--------|--------------------------|--------|
| Exercise Price |   |   | Options Outstanding |   |      | Contractual Life (years)   |   |   | Options Exercisable |   |
| $                   | 0.650  |   |                     |   | 375,000   |                                 |   |   | 7.85                     |   |   |   | 274,167 |   |
| $                   | 0.879  |   |                     |   | 983,264   |                                 |   |   | 5.02                     |   |   |   | 983,264 |   |
| $                   | 0.900  |   |                     |   | 1,937,239 |                                 |   |   | 6.92                     |   |   |   | 1,452,929 |   |
| $                   | 0.930  |   |                     |   | 25,000    |                                 |   |   | 6.93                     |   |   |   | 25,000 |   |
| $                   | 1.318  |   |                     |   | 93,855    |                                 |   |   | 5.26                     |   |   |   | 93,855 |   |
| $                   | 1.500  |   |                     |   | 121,169   |                                 |   |   | 7.07                     |   |   |   | 60,585 |   |
| $                   | 2.000  |   |                     |   | 425,000   |                                 |   |   | 6.11                     |   |   |   | 425,000 |   |
| $                   | 2.500  |   |                     |   | 73,189    |                                 |   |   | 2.93                     |   |   |   | 73,819 |   |
| $                   | 2.350  |   |                     |   | 50,000    |                                 |   |   | 8.77                     |   |   |   | 12,500 |   |
| $                   | 2.400  |   |                     |   | 500,000   |                                 |   |   | 8.79                     |   |   |   | 125,000 |   |
| $                   | 6.470  |   |                     |   | 500,000   |                                 |   |   | 9.76                     |   |   |   | - |   |
| $                   | 6.230  |   |                     |   | 184,000   |                                 |   |   | 6.60                     |   |   |   | - |   |
|                |   |   |                     |   | 5,268,346 |                                 |   |   |                     |   |   |   | 3,526,118 |   |

|                                         |   | March 31, |       |
|----------------------------------------------|--------|----------------|------------|
|                                         |   | 2011           |       |   | 2010 |   |
| Weighted average fair value on date of grant |   | $              | 1.15       |   |   | $ | 0.82 |   |
| Total aggregate intrinsic value              |   | $              | 21,744,503 |   |   | $ | 17,027,595 |   |

----

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

|                                                       |   | For the three months ended |      |
|------------------------------------------------------------|--------|------------------------------------------------|-----------|
|                                                       |   | March 31, 2011                       |      |
|                                                       |   | Numberof warrants                         |      |   | Weighted AverageExercise Price |   |
|                                                       |   |                                           |      |   |   |   |
| Outstanding and exercisable at the beginning of the period |   |                                           | 2,300,231 |   |   | $ | 2.045 |   |
| Exercised                                                  |   |                                           | (46,565   | ) |   | $ | 2.500 |   |
| Exercised                                                  |   |                                           | (23,299   | ) |   | $ | 0.880 |   |
| Outstanding and exercisable at the end of the period       |   |                                           | 2,230,367 |   |   | $ | 2.150 |   |

|                                                       |   | For the three months ended |      |
|------------------------------------------------------------|--------|------------------------------------------------|-----------|
|                                                       |   | March 31, 2010                       |      |
|                                                       |   | Numberof warrants                         |      |   | Weighted AverageExercise Price |   |
|                                                       |   |                                           |      |   |   |   |
| Outstanding and exercisable at the beginning of the period |   |                                           | 3,558,924 |   |   | $ | 2.18 |   |
| Exercised                                                  |   |                                           | (70,546   | ) |   | $ | 2.19 |   |
| Outstanding and exercisable at the end of the period       |   |                                           | 3,488,378 |   |   | $ | 2.18 |   |

| NOTE 6:- | COMMITMENTS AND CONTINGENT LIABILITIES |
|----------|----------------------------------------|

| Year ended March 31, |   |
|----------------------|--------|
| 2012                 |   | $ | 222,848 |   |
| 2013                 |   | $ | 222,848 |   |
| 2014                 |   | $ | 245,133 |   |
| 2015                 |   | $ | 245,133 |   |
| 2016                 |   | $ | 245,133 |   |
|                 |   | $ | 1,181,095 |   |

| NOTE 7:- | COMMON STOCK |
|----------|--------------|

| NOTE 8:- | SUBSEQUENT EVENTS |
|----------|-------------------|

----

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

----

|   | · | 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) |
|--------|--------|----------------------------|

|   | · | Factor IX |
|--------|--------|-----------|

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

|   | · | Factor VIIa |
|--------|--------|-------------|

|   | · | Interferon β and Erythropoietin (EPO) |
|--------|--------|--------------------------------------------|

|   | · | Atherosclerosis and rheumatoid arthritis long-acting therapies |
|--------|--------|----------------------------------------------------------------|

----

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

----

----

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

----

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

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

|   | · | expense or income resulting from fluctuations of the New Israeli Shekel, in which a portion of the Company’s assets and liabilities are denominated, against the U.S. dollar and the Euro. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk |
|---------|------------------------------------------------------------|

| 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 of Proceeds. |
|---------|--------------------------------------------------------------|

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

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

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

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

|   | 10.1 | Fourth Amendment to Consulting Agreement between PROLOR Biotech, Inc. and Abraham Havron, Ph.D., incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2011. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.2 | Fifth Amendment to Employment Agreement between PROLOR Biotech, Inc. and Shai Novik, incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2011. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.3 | Fifth Amendment to Employment Agreement between ModigeneTech Ltd. and Dr. Eyal Fima, incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2011. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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.    |
|--------------|--------|-------------------------|
|         |   |                    |
| May 10, 2011 |   | /s/ Abraham Havron      |
| Date         |   | Abraham Havron          |
|         |   | Chief Executive Officer |

----

|   | 10.1 | Fourth Amendment to Consulting Agreement between PROLOR Biotech, Inc. and Abraham Havron, Ph.D., incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2011. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.2 | Fifth Amendment to Employment Agreement between PROLOR Biotech, Inc. and Shai Novik, incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2011. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.3 | Fifth Amendment to Employment Agreement between ModigeneTech Ltd. and Dr. Eyal Fima, incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2011. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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). |
|--------|------|--------------------------------------------------------------------------------------------------------------|

----