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CORRESP
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CORRESP

    Writer’s Direct Contact
212.468.8163
JTanenbaum@mofo.com

October 16, 2008

Mr. Jim Rosenberg

Senior Chief Accountant

Division of Corporation Finance

United States Securities and Exchange Commission

100 F. Street, N.E.

Washington, D.C. 20549

    RE:

    Protalix BioTherapeutics, Inc.

Annual Report on Form 10-K, filed March 17, 2008

for the Fiscal Year Ended December 31, 2007

File No. 001-33357

Ladies and Gentlemen:

     On behalf of our client, Protalix BioTherapeutics, Inc., a Florida corporation (the
“Company”), transmitted herewith are responses to the Staff’s comments to the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2007 (the “Form 10-K”), which comments
were set forth in the Staff’s letter to the Company dated October 2, 2008 (the “Comment Letter”) to
Yossi Maimon, the Company’s Chief Financial Officer and Treasurer.

     For ease of reference, we have noted the Staff’s comments in bold faced type and the responses
in regular type.

Note 5 — Share Capital, page F-20

    1.

    On page F-13 you state that the fair value of stock options was determined using the
Black-Scholes options pricing model. Please confirm to us that you used this model and tell
us the assumptions you used for 2007. Please refer to paragraph A240e.(2) of FAS 123R.

    RESPONSE:  The Company hereby confirms that it used the Black-Scholes options-pricing model
to determine the fair value of options to purchase shares of its common stock, par
value $.001 per share (the “Common Stock”), granted by the Company in 2007. However, the
Company treats the fair value of options granted with an exercise price equal to the par
value of the Common Stock (“Par Options”) as being equal to the fair value of the Common
Stock underlying the options, as discussed below.

    Set forth below are the assumptions used by the Company to calculate the fair value of stock
options in 2007.

    Employees:

    The assumptions used for option grants in 2007 are disclosed in Note 5(f)(1)(b) on page F-24
of the financial statements contained in the Form 10-K, as follows:

    2007

    Dividend yield

    0
    %

    Expected volatility

    53
    %

    Risk-free interest rate

    4.62
    %

    Expected life — in years

    6.0

    As discussed in the response to Comment No. 2, there are no restrictions on the transfer
of shares of Common Stock underlying the options granted to employees other than the
restrictions relating to the transfer of options granted to employees. Accordingly, when the
Company determined the value of options under the Black-Scholes options-pricing model, the
Company used the expected term of each option which differs from its contractual term and did
not apply a discount to the pricing model for options granted to employees.

    Non-employees:

    During 2007, the Company granted Par Options and restricted shares, which are subject to a
vesting schedule (“restricted shares”), to certain non-employees. The Company treats the
grant of Par Options as grants of Common Stock. Accordingly, the Company calculated the fair
value of the restricted shares and the Par Options to be equal to the fair value of the
Common Stock.

    2.

    We are unable to discern a consistent policy for the measurement date used under 123(R) and
EITF 96-18 as well as the valuation methodology used. In order to help us understand these
matters, please tell us the nature of the restrictions, and whether or not the restrictions
extend beyond the vesting or service period, for the following grants and how the restrictions
are reflected in the valuation method (paragraph 17 of 123(R) for employees). Please tell us
whether the nature of the restrictions is the same as the trading restrictions on the 99% of
outstanding shares of common stock.

    •

    Options held by non-employees that vested during the period

    •

    Options granted to employees during the period

    •

    Restricted common stock held by non-employees that vested during the period

    •

    Restricted common stock granted to employees during the period

    RESPONSE:  The options and restricted shares granted by the Company were not subject to the
same trading restrictions that applied to the 99% of outstanding shares of Common

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    Stock. Set forth below is a description of the restrictions imposed on the options and
restricted shares issued by the Company.

    Options held by non-employees that vested during 2007 and restricted

common stock held by non-employees that vested during 2007:

    Options and shares of Common Stock held by non-employees that vested during 2007 are not
subject to any restrictions. Notwithstanding the foregoing, certain securities held by
non-employees on December 31, 2006, the date of the merger of Protalix Ltd. with the
Company’s then wholly-owned subsidiary, Protalix Acquisition Co. Ltd. (the “Merger”) are
subject to restrictions. In connection with the Merger, substantially all of the former
shareholders of Protalix Ltd. entered into lock-up agreements to satisfy Israeli tax laws and
certain contractual obligations. The lock-up agreements prohibited such former shareholders
of Protalix Ltd. from, directly or indirectly, selling or otherwise transferring the shares
of Common Stock issued to them in connection with the Merger (including any shares of Common
Stock issuable upon the exercise of outstanding options or warrants) during the period
commencing upon the closing of the Merger and ending on January 1, 2009. However, during
such period, each such former shareholder of Protalix Ltd. had the option, under the terms of
the lock-up agreements and the tax ruling described below, to sell an aggregate of 10% of
each such shareholder’s original number of locked-up shares. On June 11, 2008, after
completing discussions with the Israeli tax authorities regarding a tax ruling regarding the
treatment of the Merger under Israeli tax laws, the Company terminated the lock-up agreements
for holders of 5% or less of the Company’s outstanding shares as of the closing of the
Merger.

    The Company did not consider these restrictions when it measured the fair value of options
and shares of Common Stock held by non-employees that vested during 2007. The Israeli tax
authorities imposed these restrictions on the options as a precondition to favorable tax
treatment of such considerations. As the holders of the options benefit from the
restrictions, the Company determined that the restrictions should not lead to a discount to the
fair value of the options.

    Options granted to employees during the period:

    Options granted to employees, prior to exercise, may not be sold, pledged, assigned,
transferred or disposed of in any manner other than by will or by the laws of descent or
distribution. In addition, if an employee’s continuous service is terminated while an option
is unexercised, the employee (or his or her estate or a person who acquired the right to
exercise the award by bequest or inheritance) may exercise the portion of the employee’s
award that was vested as of the date of such termination or such other portion of the
employee’s award as may be determined by the administrator of the Protalix BioTherapeutics,
Inc., 2006 Stock Incentive Plan according to the following post-termination exercise periods
(unless the applicable award agreement provides otherwise):

    for any reason other than cause, disability or death:

    12 months from date of termination

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    for cause:

    14 days from date of termination

    for disability:

    12 months from date of termination

    for death (including the death of the employee during these post-termination exercise periods):

    12 months from date of death

    Notwithstanding the foregoing, in no event shall an option be exercisable later than the
expiration date of the term of the award as set forth in the applicable award agreement. To
the extent that an employee’s award was unvested at the date of termination, or if the
employee does not exercise the vested portion of the employee’s award within the time
specified in the applicable award agreement, the award shall terminate.

    The options are not subject to any additional restrictions other than the vesting conditions.

    Restricted common stock granted to employees during the period:

    The Company did not issue any restricted shares to employees during the period.

    As required by FAS 123R, the Company considered the restrictions discussed herein when
valuing options under the Black-Scholes options-pricing model using
an expected term for the
options that differs from the contractual term of the options.

    3.

    You stated in your disclosure on page 57 that you are using the expected term based on the
simplified method. Please address the following:

    •

    Please tell us if any of the features discussed in footnote 7 of SAB 107A
exists, and if not, why you believe using the expected term, which may be shorter
than the contractual term, is appropriate. Refer to SAB 107D(2)(Q6).

    •

    If there are restrictions on stock that go beyond the vesting or service date,
it does not appear that the simplified method is appropriate.

    •

    It appears that an option that is “in the money” may have a different expected
term than an option that is “at the money”, which was one of the prerequisites
for using the simplified method for determining the expected term. Please tell us
why you believe use of the simplified method is appropriate based on the guidance
in SAB 107D(2)(Q6).

    RESPONSE:  The disclosure on page 57 of the Form 10-K refers to the use of the simplified
method to calculate the expected term of options granted by the Company to employees in 2007.
The following is an analysis of the Company’s use of the simplified method in connection
with options granted to employees in 2007.

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    As discussed in the response to Comment No. 2, options, prior to exercise, may not be sold,
pledged, assigned, transferred or disposed of in any manner other than by will or by the laws
of descent or distribution. In addition, as noted in the response to Comment No. 2, the
contractual terms of options are subject to early termination in connection with post-vesting
service termination. Such features are consistent with the features discussed in Footnote 7
of SAB 107A.

    Except as discussed in the response to Comment No. 2, there are no other restrictions on the
stock options granted to employees during the period, other than the vesting conditions. In
addition, there are no restrictions on the shares of Common Stock issued in connection with
the exercise of stock options by employees. As required by FAS 123R, the Company considered
the restrictions discussed herein when valuing options under the Black-Scholes
options-pricing model using an expected term for the options that differs from the
contractual term of the options.

    While the Company assumed that the average exercise period for options granted “in the money”
would be shorter than the average period between the vesting and the expiration of the
options, due to the lack of information regarding exercise behavior, the Company implemented
the simplified method for the calculation of the expected period. As indicated in Exhibit B,
the Company only made one option grant to an employee during 2007. The grant to an employee
in May 2007 of options to purchase 204,351 shares of Common Stock was “in the money,” based
on the closing price of the Common Stock on the date of grant. Accordingly, management does
not believe that the fair value of the option would be materially different based on a
shorter expected term assumption.

    4.

    Please provide us an analysis, preferably in tabular format, of all equity issuances in 2007
and 2008, the date of grant/ issuance, fair value used, measurement date, trading value on the
measurement date, the exercise price, if applicable, recipient of the grant/ issuance
(employee/ non-employee and related party/ non-related party), any post-vesting/service period
restrictions, and the amount of compensation recorded for each issuance. Please provide a
separate table for non-employee issuances/grants in which compensation was recorded based on a
vesting date during the period.

    RESPONSE:

    Please see Exhibit A and Exhibit B attached hereto.

    5.

    For the first quarter in 2007 you used the quoted market price on the Tel-Aviv Stock Exchange
for Bio-Cell rather than Over-the-Counter Bulletin Board (OTCBB) bid/ask because you stated
there was insufficient volume on OTCBB. Please address the following:

    •

    Tell us if you used the quoted market price on the measurement date or the quoted
market price at the end of the quarter (i.e. March 31, 2007)

    •

    We understand your stock was listed on the American Stock Exchange beginning
March 12, 2007. Tell us if you had any measurement dates on or

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    after this date and if so, why you used Tel-Aviv stock exchange for Bio-Cell instead of
the American Stock Exchange for the company.

    RESPONSE:  During the first quarter of 2007, the Company did not grant any options to
employees or non-employees. The only measurement the Company made for the first quarter of
2007 was the final measurement of 175,303 outstanding options held by non-employees that
vested at the end of the quarter, and an interim measurement for 35,231 remaining options
that were subject to further vesting as of the end of the quarter.

    For purposes of the March 30, 2007 measurement date, the Company determined the fair value of
outstanding options held by non-employees that vested at the end of the first quarter of 2007
based on the valuation of the Company’s largest shareholder, Bio-Cell Ltd. (“Bio-Cell”), an
Israeli public company traded on the Tel Aviv Stock Exchange, not on the trading price of the
Common Stock reported by the American Stock Exchange (the “AMEX”). As of March 31, 2007,
Bio-Cell held approximately 20% of the outstanding shares of Common Stock and did not have
any other significant assets other than its interest in the Company.

    Fundamentally, while the Company understands that observable transactions in its Common Stock
are generally presumed to be the fair value of the Common Stock, it is the Company’s belief
that the price levels of the Common Stock throughout most of 2007 were not reflective of a
reasonable fair value for the Common Stock if one considers all other available evidence
relating to the value of the Common Stock. As the Company prepared the financial statements
for the first quarter of 2007, it believed that the trading prices reported by the AMEX
should not be the exclusive determinant of the fair value of the Common Stock. Rather, in
situations like the Company’s, in which the trading price of a security is clearly not
indicative of its fair value, the Company should consider all available evidence of the fair
value of the Common Stock in order to accurately reflect the cost of stock compensation
arrangements. The Company believes that the aggregate trading volume of 38,500 shares of
Common Stock on the AMEX during the first quarter of 2007 was not sufficient evidence to
determine a fair value for transactions involving the
2.1 million shares of Common Stock underlying the stock
compensation arrangements. Further, the trading price of the Common Stock on the AMEX was
especially not indicative of the market value of the Company’s outstanding shares of Common
Stock, in the aggregate, if one considers the 65 million shares of Common Stock outstanding
(resulting in an implied value of the Company equal to approximately $2 billion).

    In the Company’s judgment, there was sufficient activity in the market for Bio-Cell’s shares
to use as an evidence of the fair value of the Common Stock for the first quarter of 2007.
The average daily trading volume of Bio-Cell’s sh