Protalix BioTherapeutics, Inc. Annual Report 2019

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FY2019 Annual Report · Protalix BioTherapeutics, Inc.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

001-33357
(Commission file number)

PROTALIX BIOTHERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)

Delaware
State or other jurisdiction
of incorporation or organization

2 Snunit Street
Science Park
POB 455
Carmiel, Israel
(Address of principal executive offices)

65-0643773
(I.R.S. Employer
Identification No.)

2161401
(Zip Code)

972-4-988-9488
Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common stock, $0.001 par value

Trading Symbol(s)
PLX

Name of each exchange on which
registered
NYSE American

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of

1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405

of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or

an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Non-accelerated filer

☐

Accelerated filer

☒

Smaller reporting company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any

new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Emerging growth company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of June 30, 2019 was approximately

$68.1 million, based on the closing price for shares of the Registrant’s common stock reported by the NYSE American for such date.

On March 1, 2020, approximately 14,838,213 shares of the Registrant’s common stock, par value $0.001 per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s proxy statement related to its 2020 Annual Stockholders’ Meeting to be filed subsequently are incorporated by reference
into Part III of this Annual Report on Form 10-K. Except as expressly incorporated by reference, the registrant’s proxy statement shall not be deemed to be
part of this report.

Business

Cautionary Statement Regarding Forward-Looking Statements
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures

Properties
Legal Proceedings

FORM 10-K
TABLE OF CONTENTS

PART I

PART II

Selected Financial Data

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information

Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services

PART III

PART IV

Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures

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PART I

Except where the context otherwise requires, the terms, “we,” “us,” “our” or “the Company,” refer to the business of Protalix BioTherapeutics, Inc. and
its consolidated subsidiaries, and “Protalix” or “Protalix Ltd.” refers to the business of Protalix Ltd., our wholly-owned subsidiary and sole operating
unit.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The statements set forth under the captions “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
“Risk Factors,” and other statements included elsewhere in this Annual Report on Form 10-K, which are not historical, constitute “forward-looking
statements” within the meanings of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities
Exchange Act of 1934, as amended, or the Exchange Act, including statements regarding expectations, beliefs, intentions or strategies for the future. When
used in this report, the terms “anticipate,” “believe,” “estimate,” “expect,” “can,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,”
“project,” “should,” “will,” “would” and other words or phrases of similar import, as they relate to our company or our subsidiaries or our management, are
intended to identify forward-looking statements. We intend that all forward-looking statements be subject to the safe-harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are only predictions and reflect our views as of the date they are made with
respect to future events and financial performance, and we undertake no obligation to update or revise, nor do we have a policy of updating or revising, any
forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated
events, except as may be required under applicable law. Forward-looking statements are subject to many risks and uncertainties that could cause our actual
results to differ materially from any future results expressed or implied by the forward-looking statements.

Examples of the risks and uncertainties include, but are not limited to, the following:

· the risk that the U.S. Food and Drug Administration, or the FDA, will not accept an application for Accelerated Approval of PRX-102
with the data generated to date or will request additional data or other conditions of the submission, or that the FDA, the European Medicines Agency, or
the EMA, or other foreign regulatory authorities may not accept or approve a marketing application we file for any of our other product candidates;

· risks relating to our evaluation and pursuit of strategic alternatives;

· risks related to our ability to identify and obtain financing on attractive terms or at all within the time period required to regain

compliance with the continued listing standards of the NYSE American LLC, or the NYSE American, or to otherwise maintain compliance with its
continued listing standards;

· risks related to our ability to continue as a going concern absent a strategic transaction, refinancing or restructuring;

· failure or delay in the commencement or completion of our preclinical studies and clinical trials, which may be caused by several factors,

including: slower than expected rates of patient recruitment; unforeseen safety issues; determination of dosing issues; lack of effectiveness during clinical
trials; inability or unwillingness of medical investigators and institutional review boards to follow our clinical protocols; inability to monitor patients
adequately during or after treatment; and or lack of sufficient funding to finance our clinical trials;

· the risk that the results of our clinical trials will not support the applicable claims of safety or efficacy and that our product candidates

will not have the desired effects or will have undesirable side effects or other unexpected characteristics;

· risks relating to our ability to manage our relationship with our collaborators, distributors or partners;

· risks relating to our ability to make required payments under our outstanding convertible notes or any other indebtedness;

· risks relating to the compliance by Fundação Oswaldo Cruz, or Fiocruz, an arm of the Brazilian Ministry of Health, or the Brazilian
MoH, with its purchase obligations under our supply and technology transfer agreement, which may have a material adverse effect on us and may also
result in the termination of such agreement;

· our dependence on performance by third-party providers of services and supplies;

· the impact of development of competing therapies and/or technologies by other companies;

· risks related to our supply of drug product to Pfizer Inc.;

· risks related to our expectations with respect to the potential commercial value of our product and product candidates;

· potential product liability risks, and risks of securing adequate levels of related insurance coverage;

· the possibility of infringing a third-party’s patents or other intellectual property rights and the uncertainty of obtaining patents covering

our products and processes and successfully enforcing our intellectual property rights against third-parties;

· risks relating to changes in healthcare laws, rules and regulations in the United States or elsewhere; and

· the possible disruption of our operations due to terrorist activities and armed conflict, including as a result of the disruption of the
operations of regulatory authorities, our subsidiaries, our manufacturing facilities and our customers, suppliers, distributors, collaborative partners,
licensees and clinical trial sites.

Given these uncertainties, you should not place undue reliance on these forward-looking statements. Companies in the pharmaceutical and biotechnology
industries have suffered significant setbacks in advanced or late-stage clinical trials, even after obtaining promising earlier trial results or preliminary
findings for such clinical trials. Even if favorable testing data is generated from clinical trials of a drug product, the FDA or foreign regulatory authorities
may not accept or approve a marketing application filed by a pharmaceutical or biotechnology company for the drug product.

These and other risks and uncertainties are detailed under the heading “Risk Factors” in this Annual Report and are described from time to time in the
reports we file with the U.S. Securities and Exchange Commission, or the Commission.

Item 1.

Business

We are a biopharmaceutical company focused on the development, production and commercialization of recombinant therapeutic proteins produced by our
proprietary ProCellExÒ plant cell-based protein expression system. We are the first and only company to gain FDA approval of a protein produced through
plant cell-based expression in suspension. Our unique expression system represents a new method for developing recombinant proteins in an industrial-
scale manner.

Our strategic focus is to develop tailored complex recombinant therapeutic proteins primarily produced by our proprietary plant cell-based system
ProCellEx while genetically engineering and/or chemically modifying the proteins pre and post-production. We intend such engineering and modifications
to provide added clinical benefits by improving the biologic characteristics (e.g., glycosylation, half-life, immunogenicity) of the therapeutic protein.

Our proprietary ProCellEx platform is being used to manufacture our approved and marketed product, Elelyso®, for the treatment of Gaucher disease. We
are also developing, via ProCellEx, a pipeline of products and are in advanced clinical phase development with pegunigalsidase alfa, or PRX-102, for the
treatment of Fabry disease; tulinercept, or OPRX-106, for the treatment of Inflammatory Bowel Diseases; product alidornase alfa, or PRX-110, for the
treatment of multiple indications; and Uricase, or PRX-115, for the treatment of Gout. We also have a number of other product candidates in early and
preclinical development.

Our senior management team is expressly qualified to develop and market our ProCellEx platform product candidates, and is dedicated to building a world-
class company. We strengthened our senior management team in 2019 with the key appointments of Dror Bashan, as President and Chief Executive Officer,
and Eyal Rubin, as Senior Vice President and Chief Financial Officer. Zeev Bronfeld was elected to serve as the Chairman of our Board of Directors, and
the Board of Directors was further enhanced with the appointments of Pol F. Boudes, M.D. and Gwen A. Melincoff. Dr. Boudes and Ms. Melincoff each
brings significant expertise and insights that we believe will help guide and grow our company.

Our ProCellEx Platform

ProCellEx is our proprietary platform used to produce and manufacture recombinant proteins through plant cell-based expressions in suspension.
ProCellEx consists of a comprehensive set of proprietary technologies and capabilities, including the use of advanced genetic engineering and plant cell
culture technology, enabling us to produce complex, proprietary, and biologically equivalent proteins for a variety of human diseases. Our protein
expression system facilitates the creation and selection of high-expressing, genetically-stable cell lines capable of expressing recombinant proteins.

Our technology allows for many unique advantages, including: biologic optimization; an ability to handle complex protein expressions; the potential for
oral delivery of proteins; flexible manufacturing with improvements through efficiencies, enhancements and/or rapid horizontal scale-ups; a simplified
production process; elimination of the risk of viral contaminations from mammalian components; and intellectual property advantages.

We developed ProCellEx based on our plant cell culture technology for the development, expression and manufacturing of recombinant proteins, which are
the essential foundation of modern biotechnology. We develop new, recombinant therapeutic proteins by using the natural capability of agrobacterium to
transfer a DNA fragment into the plant chromosome, allowing the genome of the plant cell to code for specific proteins of interest. The agrobacterium-
mediated transformed cells are then able to produce specific proteins, which are extracted and purified and can be used as therapies to treat a variety of
diseases.

ProCellEx technology can be utilized to express complex therapeutic proteins belonging to different drug classes, such as enzymes, hormones, monoclonal
antibodies, cytokines and vaccines. The entire protein expression process, from initial nucleotide cloning to large-scale production of the protein product,
occurs under cGMP-compliant, controlled processes. Our plant cell culture technology uses cells, such as carrot and tobacco (BY-2) cells, which undergo
advanced genetic engineering and/or chemical modifications, and are grown on an industrial scale in a disposable, flexible bioreactor system. Our system
does not involve mammalian or animal-derived components or transgenic field-grown or whole plants at any point in the production process.

Cell growth, from initiating scale-up steps from a cell-bank through large-scale production takes place in a clean-room environment in flexible, sterile,
custom-designed polyethylene bioreactors, and does not require the use of large stainless-steel bioreactors commonly used in mammalian-based systems
for recombinant protein production. The ProCellEx reactors are easy to use and maintain, allowing for rapid horizontal scale-up and do not involve the risk
of mammalian viral contamination. Our bioreactors are well-suited for plant cell growth using a simple, inexpensive, chemically defined growth medium.
The reactors, which are custom-designed and optimized for plant cell cultures, require low initial capital investment and are rapidly scalable at a low cost.

Business Highlights

We have one marketed and commercialized product, ElelysoÒ for the treatment of Gaucher disease, and a pipeline of assets in clinical development for
Fabry disease, Inflammatory Bowel Disease, Gout and additional indications. All of our marketed and clinical assets were developed in-house using our
ProCellEx system and technology.

ElelysoÒ

Elelyso for the treatment of Gaucher Disease is currently approved and marketed in 23 countries including the United States, Australia, Canada, Israel,
Brazil, Russia and Turkey. In June 2012, the European Committee for Medicinal Products for Human Use (CHMP) issued a positive opinion regarding the
benefit of Elelyso but did not immediately grant marketing authorization because of the ten-year market exclusivity granted to VprivÒ (Takeda Shire) in
August 2010 for the same condition, which was later extended for an additional two years. Elelyso is marketed globally, excluding Brazil, through an
exclusive licensing agreement with Pfizer. We maintain the distribution rights to Elelyso in Brazil, where it is marketed as BioManguinhos alfataliglicerase,
through the Supply and Technology Transfer Agreement we entered into on June 18, 2013, with Fiocruz, an arm of the Brazilian MoH, or the Brazil
Agreement. In 2019, we generated $9.1 million from sales of BioManguinhos alfataliglicerase to the Brazilian MoH.

Pegunigalsidase alfa (PRX-102)

Pegunigalsidase alfa is our late-stage clinical asset in development for the treatment of Fabry disease. It is currently the subject of three ongoing phase III
clinical trials (BALANCE, BRIDGE, and BRIGHT). All three trials are fully-enrolled. Our phase I/II clinical trial of PRX-102, which was completed in
2015, was a naïve study which demonstrated a significant reduction of Gb3 inclusion in kidney biopsies from adult Fabry patients. Patients from the
phase I/II clinical trial have been enrolled into a long-term extension study. We recently announced positive 12-month interim data from the BRIDGE
phase III open-label, single-arm, switchover study to assess the efficacy and safety of PRX-102 in Fabry patients previously treated with Replagal®
(Takeda Shire), and anticipate final results from this trial in the second quarter of 2020. We anticipate the release of additional data from the BRIGHT and
BALANCE trials in the fourth quarter of 2020 and the first quarter of 2021, respectively. We have entered into two exclusive global licensing and supply
agreements (ex-U.S. and U.S.) with Chiesi Farmaceutici S.p.A., or Chiesi, for PRX-102; on October 19, 2017, Protalix Ltd., our wholly-owned subsidiary,
entered into an Exclusive License and Supply Agreement with Chiesi, or the Chiesi Ex-US Agreement, pursuant to which Chiesi was granted an exclusive
license for all markets outside of the United States to commercialize PRX-102 and on July 23, 2018, Protalix Ltd. entered into an Exclusive License and
Supply Agreement with Chiesi, or the Chiesi U.S. Agreement, with respect to the commercialization of PRX-102 in the United States.

Tulinercept (OPRX-106)

Tulinercept is our orally-delivered protein product candidate for Inflammatory Bowel Disease (IBD). We completed a phase I clinical trial of OPRX-106 in
healthy volunteers, which showed OPRX-106 to be well-tolerated. We completed a phase IIa clinical trial which demonstrated positive results in ulcerative
colitis patients.

Alidornase alfa (PRX-110)

Alidornase alfa is our plant cell-expressed recombinant human DNase I product candidate, chemically modified to resist inhibition by actin, thus enabling
enzymatic activity in the presence of actin. In vitro studies have shown PRX-110 to have a highly improved catalytic efficiency and affinity to DNA
compared to the unmodified DNase I. We completed a phase IIa clinical trial of PRX-110 in Cystic Fibrosis patients in 2018, and PRX-110 was shown to
be generally well-tolerated with no serious adverse events reported. Efficacy results demonstrated clinically meaningful lung function improvement
following treatment with PRX-110.

PRX-115

PRX-115 is our plant cell-expressed recombinant PEGylated Uricase (Urate Oxidase) – a chemically modified enzyme to treat Gout. The Uricase enzyme
converts uric acid to allantoin, which is easily eliminated through urine. We use our proprietary plant-based system to express an optimized recombinant
enzyme under development for the potential treatment of Gout which is designed to have an improved half-life, reduced immunogenicity and better
efficacy.

2019 and Recent Company Developments

On March 12, 2020, we entered into securities purchase agreements, or the Purchase Agreements, with certain existing and new institutional and other
accredited investors, or the Purchasers. Pursuant to the Purchase Agreements, we, in a private placement in reliance on the exemption from the registration
requirements of the Securities Act, agreed to issue and sell to the Purchasers an aggregate of approximately 17.6 million unregistered shares of our
common stock at a price per share of $2.485, or gross aggregate proceeds equal to approximately $43.7 million. Each share to be issued will be
accompanied by a warrant to purchase one share of our common stock, or the Warrant Shares, at an exercise price equal to $2.36. We have agreed to file a
registration statement with the Commission to register for resale the shares issued in the private placement, including the Warrant Shares.

On February 5, 2019, we announced preliminary pharmacokinetic (PK) data from our phase III BRIGHT study at the 15th Annual WORLDSymposiumTM
2019. Data showed PRX-102 to be well-tolerated; and infusion of 2 mg/kg PRX-102 administered every 4 weeks resulted in the presence of continuous
active enzyme throughout the entire infusion interval. Infusions every 2 weeks is the current standard of care under approved Enzyme Replacement
Therapies, or ERTs, for the treatment of Fabry disease.

On May 21, 2019, we announced the appointment of Mr. Dror Bashan as our President and Chief Executive Officer, effective as of June 30, 2019. Mr.
Bashan has over 20 years of experience in the pharmaceutical industry with roles in business development, marketing, sales, and finance, providing him
deep experience and knowledge of the global pharmaceutical and healthcare industries. Prior to joining Protalix, Mr. Bashan served as Senior Vice
President, Global Business Development for Teva Pharmaceutical Industries Limited, or Teva, and was involved in strategic alliances, cross-company
strategic projects and the acquisition and divestiture of assets.

On June 6, 2019, we announced that, following a series of meetings and correspondence with the FDA, we plan, together with Chiesi, to file a biologics
license application, or a BLA, for pegunigalsidase alfa for the treatment of Fabry disease via the FDA’s Accelerated Approval pathway.

On June 17, 2019, we announced the completion of enrollment in our phase III BRIGHT study. The BRIGHT study is a 12-month, open-label switchover
study designed to assess the safety, efficacy and pharmacokinetics (PK) of PRX-102 administered at a dose level of 2 mg/kg every 4 weeks in up to 30
Fabry patients previously treated with the current standard of care, ERTs Fabrazyme® (Sanofi Genzyme) or Replagal.

On July 29, 2019, we announced the appointment of Mr. Eyal Rubin, as our Senior Vice President and Chief Financial Officer, effective as of
September 22, 2019. Mr. Rubin has deep knowledge of both the biotechnology and pharmaceutical industries with over 20 years of finance and capital
markets experience; he has an extensive background in financial planning, operations, management and strategy.

On August 13, 2019, we announced that Mr. Zeev Bronfeld had been unanimously elected as Chairman of our Board of Directors following the resignation
of Mr. Shlomo Yanai. Mr. Bronfeld has been a long-time independent director of our Board of Directors and is one of the earliest investors in our company.
He has extensive knowledge and experience in the management of biotechnology and life science companies.

On August 22, 2019, we announced the engagement of a first-tier financial advisory firm to assist in evaluating and pursuing strategic alternatives to
maximize stakeholder value.

On September 24, 2019, we, jointly with our collaboration partner, Chiesi, announced the completion of enrollment in our BALANCE study in Fabry
patients with impaired renal function. Patients participating in the study are being evaluated to, among other disease parameters, determine if their renal
function continues to deteriorate at the same rate while being treated with agalsidase beta (Fabrazyme) as measured by estimated Glomerular Filtration
Rate, or eGFR, slope. In addition, participating patients are being evaluated to assess the safety and tolerability of PRX-102.

On October 17, 2019, we announced positive 12-month interim data from our BRIDGE study. Data from the first 16 of the 22 adult patients (9 males and 7
females) demonstrated a mean improvement in kidney function in both male and female patients when switched from agalsidase alfa (Replagal) to PRX-
102.

On November 18, 2019, we announced the completion of a Type B Pre-Biologics License Application (BLA) meeting with the FDA regarding the
Accelerated Approval pathway for PRX-102 for the treatment of Fabry disease. We and the FDA reached alignment on the data to be included in our
anticipated BLA filing for PRX-102, which will include data from our completed phase I/II clinical trials and data from our ongoing BRIDGE study.
Additionally, our BALANCE study is expected to serve as the confirmatory trial for PRX-102 as currently designed. A confirmatory trial is required to
convert a BLA approved under an Accelerated Approval pathway into a traditional approval.

On December 6, 2019, we announced a reverse stock split at a ratio of 1-for-10 and a reduction in the total number of our authorized shares of the common
stock from 350 million shares to 120 million shares. The action was part of a plan to regain compliance with the continued listing guidelines of the NYSE
American and to respond to a deficiency letter from the NYSE American, announced on August 30, 2019.

On December 19, 2019, we announced the appointments of Pol F. Boudes, M.D., and Gwen A. Melincoff to our Board of Directors. Dr. Boudes brings
extensive medical research and development experience in Fabry disease, orphan drug development and medical innovation. Ms. Melincoff brings
extensive experience in biotechnology and pharmaceutical business development, deal-formation and venture capital funding.

Our Marketed Product

Elelyso®

Elelyso (taliglucerase alfa), our first commercial product for the treatment of Gaucher disease, is the first plant cell derived recombinant protein therapeutic
approved by major regulatory authorities, including the FDA and the EMA. Elelyso is approved in 23 markets for injection as an ERT for the long-term
treatment of adult and pediatric patients with a confirmed diagnosis of type 1 Gaucher disease. We have licensed to Pfizer the global rights for Elelyso in
all markets, excluding Brazil. In Brazil, we maintain the distribution rights to Elelyso, marketed as BioManguinhos alfataliglicerase, through the Brazil
Agreement. In 2019, we generated $9.1 million from sales of BioManguinhos alfataliglicerase to the Brazilian MoH.

Gaucher disease, also known as glucocerebrosidase deficiency, is a rare genetic autosomal recessive disorder and one of the most common Lysosomal
Storage Disorders (LSD) in the world. It is one of a group of disorders that affect specific enzymes that normally break down fatty substances for reuse in
the cells. If the enzymes are missing or do not work properly, the substances can build up and become toxic. Gaucher disease occurs when a lipid called
glucosylceramide accumulates in the cells of the bone marrow, lungs, spleen, liver, and sometimes the brain. Gaucher disease symptoms can include
fatigue, anemia, easy bruising and bleeding, severe bone pain and easily broken bones, and distended stomach due to an enlarged spleen and
thrombocytopenia. Epidemiology of Gaucher disease varies; recent literature provides that prevalance of Gaucher disease ranges from 0.70 to 1.75 per
100,000 in the general population. In people of Ashkenazi Jewish heritage, estimates of occurence vary from approximately 1 in 400 to 1 in 850 people.

The current standard of care for Gaucher disease is ERT, which is a medical treatment where recombinant enzymes are injected into patients to replace the
lacking or dysfunctional enzyme. In Gaucher disease, recombinant glucocerebrosidase (GCD) is injected to replace the mutated or deficient natural GCD
enzyme. Elelyso is the only alternative ERT treatment of Gaucher disease to Sanofi Genzyme’s Cerezyme® and VPRIV.

Our Clinical Development Pipeline

Pegunigalsidase alfa (PRX-102)

Pegunigalsidase alfa (PRX-102) is our proprietary plant cell culture expressed enzyme in development for the treatment of Fabry disease. It is a chemically
modified version of the recombinant α-galactosidase-A (α-Gal-A) protein, developed using our ProCellEx technology. We have completed enrollment in all
three of our ongoing phase III clinical trials of PRX-102 (BALANCE, BRIDGE and BRIGHT) which are designed, as a whole, to evaluate the potential
superiority of PRX-102 over current ERT therapies, demonstrate the potential for improved efficacy and potentially better quality of life for Fabry patients
and demonstrate the safety of our ERT. We anticipate that, in coordination with Chiesi, a BLA will be filed with the FDA under an Accelerated Approval
Pathway based on the completed phase I/II clinical trials of PRX-102, and from the ongoing BRIDGE study. In October 2019, we met, together with Chiesi,
with the FDA to discuss key information on PRX-102 to be included in the proposed BLA filing and reached alignment with the FDA on the Accelerated
Approval pathway for PRX-102. In February 2020, we, together with Chiesi, announced an agreement with the FDA for the Initial Pediatric Study Plan
(iPSP) for PRX-102. The joint announcement was made after completion of discussions with the FDA and receipt of confirmation from the FDA in an
official “Agreement Letter” which outlines an agreed-upon approach to evaluate the safety and efficacy of PRX-102 in pediatric Fabry patients.

We have granted to Chiesi an exclusive license to develop and commercialize PRX-102 for worldwide markets; in return, we are eligible to receive
milestone and royalty payments from Chiesi. The global market for Fabry disease is forecasted to exceed $1.5 billion in 2019 (Global Data) and continues
to grow at a CAGR of approximately 10% (Data Bridge Market Research).

Fabry disease is a serious life-threatening rare genetic disorder. Fabry patients lack the lysosomal enzyme, α-galactosidase-A leading to the progressive
accumulation of abnormal deposits of a fatty substance called globotriaosylceramide (Gb3) in blood vessel walls throughout their body. The abnormal
storage of Gb3 increases with time and, as a result, Gb3 accumulates, primarily in the blood and in the blood vessel walls. The accumulation leads to a
narrowing of the blood vessels, which in turn leads to decreased blood flow and tissue nourishment. The ultimate consequences of Gb3 deposition range
from episodes of pain and impaired peripheral sensation to end-organ failure, particularly of the kidneys, but also of the heart and the cerebrovascular
system. Fabry disease occurs in one person per 40,000 to 60,000 males.

Fabry disease is generally treated with an ERT, Fabrazyme or Replagal. In ERT, the missing α-galactosidase-A is replaced with a recombinant form of the
protein via intravenous (IV) infusion once every two weeks. Fabry disease, if left untreated, will progress from a less severe condition to a more serious
one. It can have a significant impact on quality of life due to presence of serious, chronic, and debilitating complications, including cardiovascular and
renal complications, and comorbid conditions such as pain can have a significant impact on the psychological well-being of Fabry patients, which also
impacts social functioning. Fabry disease involves substantial reduction in life expectancy. Causes of death are most often cardiovascular disease and, to a
lesser extent, cerebrovascular disease and renal disease. The life expectancy of Fabry patients is significantly shorter compared to the general population.
Untreated male Fabry patients may experience shortened lifespans to approximately 50 years, and 70 years for untreated women. This represents a 20- and
10-year reduction, respectively.

In January 2018, the FDA granted Fast Track designation to PRX-102. Fast Track designation is a process designed to facilitate the development and
expedite the review of drugs and vaccines for serious conditions that fill an unmet medical need.

In December 2017, the European Commission granted Orphan Drug Designation to PRX-102 for the treatment of Fabry disease. Orphan Drug Designation
for PRX-102 allows Chiesi access to a centralized marketing authorization procedure in Europe, including applications for inspections and for protocol
assistance. Additionally, PRX-102 could potentially receive 10 years of market exclusivity within the European Union, with respect to new treatments, if
the orphan drug designation is maintained at the time PRX-102 is approved for marketing in the European Union.

Our clinical development program is designed to show that PRX-102 has a potential clinical benefit in all adult Fabry patient populations when compared
to currently marketed Fabry disease enzymes, Fabrazyme and Replagal. In preclinical studies, PRX-102 showed enhanced activity in Fabry disease target
organs, reduction of the accumulated substrate, significantly longer half-life due to higher enzyme stability, and reduced immunogenicity, which together
can potentially lead to improved efficacy through increased substrate clearance and significantly lower formation of antibodies. Providing a meaningful
improvement in the health and quality of life for Fabry patients being treated with PRX-102, compared to existing therapies with their limitations,
represents a significant potential market opportunity. Global sales of current treatments for Fabry disease are forecasted to exceed $1.5 billion in 2019
(Global Data).

The PRX-102 phase III clinical program for the treatment of Fabry disease includes three separate studies: the BALANCE, BRIDGE and BRIGHT studies.
The studies are based on our phase I/II clinical trial which was completed in 2015. The phase III studies aim to show the potential superiority of PRX-102
compared to Fabrazyme in a head-to-head study and include a switch-over study from Replagal and also aim to demonstrate the safety of our ERT. We are
also evaluating the potential of a once-monthly treatment regimen for PRX-102 with a higher dose. Enrollment has been completed in each of the
BALANCE, BRIDGE and BRIGHT studies. Patients in all three studies have the option to receive infusions in a home care setting based on infusion
tolerability and country regulation. In addition, patients in all three studies have the option to continue to be treated with PRX-102 by enrolling in an
extension study.

Phase III BALANCE Study

The BALANCE study is a 24-month, randomized, double blind, active control study of PRX-102 in Fabry patients with impaired renal function. We have
completed enrollment of 78 patients in the trial, which is designed to evaluate the safety and efficacy of PRX-102 compared to agalsidase beta (Fabrazyme)
on renal function in Fabry patients with progressing kidney disease previously treated with Fabrazyme. Patients previously treated with Fabrazyme for
approximately one year and on a stable dose for at least six months were screened and then randomized on a 2:1 ratio to 1 mg/kg of PRX-102 or 1mg/kg of
Fabrazyme infused once every two weeks. Randomization is being stratified by urinary protein to creatinine ratio (UPCR) of < or ≥ 1 g/g by spot urine
sample. The study was designed such that no more than 50% of the patients enrolled in the study would be female. Approximately 40% of the enrolled
patients were female.

The primary endpoint for the BALANCE study is the comparison in the annualized rate of decline of eGFR slope between Fabrazyme and PRX-102. eGFR
is considered a reliable and accepted test to measure the level of kidney function and stage of kidney disease. Additional parameters being evaluated
include: cardiac assessment, Lyso-Gb3 (a biomarker for monitoring Fabry patients during therapy), pain, quality of life, immunogenicity, Fabry clinical
events and pharmacokinetic and other parameters. The study also evaluates the safety and tolerability of PRX-102.

We intend to conduct an interim analysis when the last patient reaches 12 months of treatment to test for non-inferiority to support anticipated regulatory
filings with the EMA. Patients enrolled in the BALANCE study will continue to be treated for a total of 24 months, at which point the data will be analyzed
to test for superiority. If the anticipated BLA filing results in an approval from the FDA under the Accelerated Approval pathway, this analysis will also be
used to support converting the accelerated approval into a full approval.

Phase III BRIDGE Study

The BRIDGE study is an open label, switch-over study designed to evaluate the safety and efficacy of 1 mg/kg of PRX-102 infused every two weeks, in up
to 22 Fabry patients. The trial, which is fully enrolled, enrolled patients currently treated with agalsidase alfa (Replagal) for at least two years and on a
stable dose for at least six months. Patients were screened and evaluated over three months while continuing Replagal treatment. Following the screening
period, each patient was enrolled and switched from Replagal treatment to receive intravenous (IV) infusions of PRX-102 1 mg/kg every two weeks for 12
months.

The 12-month interim data from the first 16 of 22 adult patients enrolled (9 males and 7 females) demonstrate a mean improvement in kidney function, in
both male and female patients, when switched from Replagal to PRX-102. The data demonstrated that 100% of the progressing patients (those with an
estimated eGFR slope between -5 and -3 mL/min/1.73 m2/year), and 66.7% of the fast progressing group (those with an estimated eGFR slope < -5
mL/min/1.73 m2/year), achieved the proposed therapeutic goals after switching to PRX-102. Therapeutic goal in the progressing group was defined as an
eGFR slope ≥ -3 mL/min/1.73 m2/year; and ≥ -5 mL/min/1.73 m2/year (or more than a 50% decrease in progression) in the fast progressing group. PRX-
102 was found to be well tolerated in the study, with all adverse events being transient in nature without sequelae. The majority of the patients who
completed the study elected to be rolled over to a long-term extension study and are continuing to be treated with PRX-102.

Interim results have shown that after one year, the mean annualized eGFR slope improved from -5.10 mL/min/1.73 m2/year while on Replagal to -0.23
mL/min/1.73 m2/year on PRX-102. Baseline characteristics of these patients, ages 27 to 60 years, were: mean eGFR 75.45 in males and 85.78 mL/min/1.73
m2 in females, annualized pre-switching eGFR slope was -5.04 and -5.18 mL/min/1.73 m2/year, in males and females respectively, mean residual
leucocytes enzymatic activity 5.9% of lab normal mean in males and 27.9% in females, and plasma lyso-Gb3 mean levels 53.6 and 13.8 nM, in males and
females, respectively.

We anticipate using data from the interim analysis to support the anticipated BLA filing with the FDA under the Accelerated Approval pathway, and we
anticipate that the final analysis will be used to support a Marketing Authorization Application (MAA) with the EMA.

Phase III BRIGHT Study

The BRIGHT study is a 12-month, open-label switch-over study designed to assess the safety, efficacy and pharmacokinetics (PK) of PRX-102 via
intravenous (IV) infusions of 2 mg/kg administered every 4 weeks in up to 30 patients with Fabry disease, previously treated with an ERT (Fabrazyme or
Replagal). To determine eligibility for participation in the study, candidates were screened to identify and select Fabry patients with stable kidney disease.
Patients who matched the criteria were enrolled in the study and switched from their current treatment of intravenous (IV) infusions every 2 weeks to 2
mg/kg of PRX-102 every 4 weeks for 12 months. We completed enrollment of the BRIGHT study in June 2019.

Patients participating in the study are evaluated, among other disease parameters, to determine if their kidney disease had not further deteriorated while
being treated with the 4-week dosing regimen as measured by eGFR and Lyso-Gb3, as well as other parameters. In addition, participating patients are
evaluated to assess the safety and tolerability of PRX-102. In February 2019, we announced preliminary pharmacokinetic (PK) data from the BRIGHT
study. The results demonstrate that PRX-102 was present and remained active in the plasma over the 4-week infusion intervals. The mean concentration of
PRX-102 at day 28 was 138 ng/mL. In comparison, published data on Fabrazyme (1mg/kg every 2 weeks) shows a mean concentration of 20 ng/mL at 10
hours post infusion. In addition, the area under the curve (AUC) for PRX-102 was measured to be approximately 2,000,000 ng·hr/mL over 28 days. Based
on published data, the AUC of Fabrazyme is approximately 10,000 ng·hr/mL. Pre-existing anti-drug antibodies (ADA) generated in patients prior to
switching to PRX-102 had substantially little effect on the circulation of PRX-102 for the 4-week period evaluated, and PRX-102 concentration in
circulation was higher than agalsidase beta, even in the presence of ADAs. A preliminary safety analysis of 19 patients enrolled in the BRIGHT study was
also conducted, and indicated that PRX-102 is well tolerated. To date, substantially all of the patients who completed the study opted, with the advice of the
treating physician, to continue treatment under the 4-week dosing regimen in a long-term extension study.

Phase I/II Study

Our phase I/II clinical trial of PRX-102, which we completed in 2015, was a worldwide, multi-center, open-label, dose ranging study designed to evaluate
the safety, tolerability, pharmacokinetics, immunogenicity and efficacy parameters of PRX-102 in adult Fabry patients. Sixteen adult, naïve Fabry patients
(9 male and 7 female) completed the trial, each in one of three dosing groups, 0.2 mg/kg, 1mg/kg and 2mg/kg. Each patient received intravenous (IV)
infusions of PRX-102 every two weeks for 12 weeks, with efficacy follow-up after six-month and twelve-month periods. Majority of the patients who
completed the trial opted to continue receiving PRX-102 in an open-label, 60-month extension study under which all patients were switched to receive 1
mg/kg of the drug, the selected dose for our BALANCE and BRIDGE studies of PRX-102.

The adult symptomatic, ERT-naïve Fabry disease patients enrolled in the phase I/II study were evaluated for Gb3 levels in kidney biopsies and for plasma
Lyso-Gb3 concentration by the quantitative BLISS methodology. Biopsies were available from 14 patients. The outcome of ≥ 50% reduction in the average
number of Gb3 inclusions per kidney PTC from baseline to month 6 was demonstrated in 11 of 14 (78.6%) of the patients treated with PRX-102. The
overall results demonstrate that PRX-102 reaches the affected tissue and reduces kidney Gb3 inclusions burden and Lyso-Gb3 in the circulation. A high
correlation was found between the two Fabry disease biomarkers, reduction of kidney Gb3 inclusions and the reduction of plasma Lyso-Gb3 over six
months of treatment.

Data was recorded at 24 months from 11 patients who completed 12 months of the long-term open-label extension trial that succeeded the phase I/II study.
Patients who did not continue in the extension trial included: female patients who became or planned to become pregnant and therefore were unable to
continue in accordance with the study protocol; and patients who relocated to a location where treatment was not available under the clinical study.

Results showed Lyso-Gb3 levels decreased approximately 90% from baseline (see Figure 1). Renal function remained stable with mean eGRF levels of
108.02 and 107.20 at baseline and 24 months, respectively, with a modest annual eGFR slope of -2.1 (see Figure 2). An improvement across all the
gastrointestinal symptoms evaluated, including severity and frequency of abdominal pain and frequency of diarrhea, was noted. Cardiac parameters,
including LVM, LVMI and EF, remained stable with no cardiac fibrosis development detected. In conclusion, an improvement of over 40% in disease
severity was shown as measured by the Mainz Severity Score Index (MSSI), a score compiling the different elements of the disease severity including
neurological, renal and cardiovascular parameters. In addition, an improvement was noted in each of the individual parameters of the MSSI.

Figure 1. Continuous reductions observed over 24 months

Figure 2. Continuous clinical stability observed over 24 months

The majority of adverse events were mild-to-moderate in severity, and transient in nature. During the first 12 months of treatment, only three of 16 patients
(less than 19%) formed anti-drug antibodies (ADA), of which two of these patients (less than 13%) had neutralizing antibodies. Importantly, however, the
ADAs turned negative for all three of these patients following 12 months of treatment. The ADA positivity effect had no observed impact on the safety,
efficacy or continuous biomarker reduction of PRX-102.

Tulinercept (OPRX-106)

Tulinercept is our oral anti-TNF product candidate expressed via our ProCellEx system. It is a plant cell expressed recombinant anti-TNF (Tumor Necrosis
Factor) protein for the treatment of Inflammatory Bowel Diseases (IBD). IBD is an umbrella term used to describe disorders that involve chronic
inflammation of the digestive tract. Types of IBD include, among others: Ulcerative Colitis, a condition that causes long-lasting inflammation and sores
(ulcers) in the innermost lining of the large intestine (colon) and rectum; and Crohn’s Disease, which is characterized by inflammation of the lining of the
digestive tract that often spreads deep into affected tissues. Both Ulcerative Colitis and Crohn’s Disease usually involve severe diarrhea, abdominal pain,
fatigue and weight loss. IBD can be debilitating and sometimes leads to life-threatening complications.

Immune-mediated inflammatory disorders can cause organ damage and are associated with increased morbidity. Common auto-immune diseases include
types of IBD such as Ulcerative Colitis and Crohn’s Disease, psoriasis, rheumatoid arthritis, and others. Treatment usually begins with anti-inflammatory
medications. As the severity of the disease increases, patients are generally treated with anti-TNF drugs, which modulate the immune response.

TNF is a protein that is produced by the body’s immune system, and people with IBD have increased levels of TNF. Anti-TNF drugs, also known as TNF-
alpha inhibitors, are designed to reduce inflammation by binding to TNF and blocking its action in the body.

OPRX-106 is designed to work locally in the gut, avoiding the systemic exposure that occurs when anti-TNF-alpha is administered by injection or
intravenous (IV) infusion. Plant cells have the unique attribute of a cellulose cell wall, which makes them resistant to protein degradation when passing
through the digestive tract. The plant cell itself serves as a delivery capsule; OPRX-106 is activated once released in the small intestine. We believe oral
delivery of OPRX-106 may be less immunogenic than injection or IV, potentially resulting in better long-term efficacy and safety, and reduced
immunogenicity. Additionally, our oral delivery of recombinant proteins could be applied to additional proteins and has the potential to change the method
of drug administration in certain additional indications.

The global market for IBD was $15.9 billion in 2018 and was expected to register a CAGR of 4.4% from 2018 to 2026 (Grand View Research), with an
estimated over 3.0 million patients in the United States and Europe. We believe oral delivery of OPRX-106 offers a more favorable method of
administration than current IBD treatments, potential clinical benefits compared to current treatments providing the potential opportunity to capture market
share, if approved.

We believe that OPRX-106, an anti-TNF, has potential advantages over current treatments for patients with IBD. It is biologically active in the gut, leading
to no systemic exposure, which may potentially result in a better safety profile. There is the potential of OPRX-106 being prescribed earlier in the disease
cycle due to lower safety concerns and better convenience. Final dosing is subject to further evaluation in clinical trial results.

Current treatments for IBD include anti-TNF drugs such as Humira®, Remicade® and Enbrel®, which are administered as subcutaneous injections or as
intravenous (IV) infusions. They are characterized by high immunogenicity and up to a 40% loss of response most likely attributed to neutralizing
antibodies. Anti-TNF alfa biologics currently on the market have “Black Box” safety warnings for malignancies and infections. Similarly, other
mechanisms for the treatment of IBD have serious safety precautions. Global sales of Humira, Remicade and Enbrel exceeded $30 billion in 2019 (for
multiple indications).

We completed a phase IIa clinical trial of OPRX-106 on adult Ulcerative Colitis patients. The study was an open label, 2-arm study on patients with active
mild to moderate Ulcerative Colitis to evaluate safety and pharmacokinetics, and key efficacy endpoints, including clinical response and remission utilizing
the Mayo score. Patients were randomized to receive 2 mg or 8 mg of OPRX-106, administered orally, once daily, for 8 weeks. Data from the phase IIa
clinical trial showed positive results in 18 out of 24 Ulcerative Colitis patients who completed the study with 89% of patients demonstrating improvements
in the Mayo score in both doses and 61% demonstrating improvement in their Geboes score. The Mayo score assesses the severity of ulcerative colitis
disease, based on stool frequency, rectal bleeding, endoscopic evaluation, and a physician’s global assessment. The Geboes score is the most commonly
used histological score in Ulcerative Colitis. Additionally, OPRX-106 was well-tolerated and adverse events (AEs) were mild-to-moderate and transient; no
systemic exposure of the drug or anti-drug antibodies were detected.

Data from our phase I clinical trial of OPRX-106 demonstrate that the drug was well-tolerated and showed biological activity. The phase I clinical trial was
a randomized, parallel-design, open-label study designed to evaluate the safety and pharmacokinetics of OPRX-106 in healthy volunteers. The trial enrolled
14 subjects who were randomized to one of three dosing cohorts receiving OPRX-106 doses equivalent to 2mg, 8mg or 16mg Tumor Necrosis Factor
receptor-Fc fusion protein. Subjects received once-daily oral administrations for five consecutive days. Results demonstrated that oral administration of
OPRX-106 is well tolerated. No major side effects were noted, and no suppression of the immune system was observed. Regulatory T cell activation
showing biological activity in the gut was observed. Fluorescence-Activated Cell Sorting analysis (FACS) was performed using various antibodies for
surface markers, and it was observed that all three dosages of OPRX-106 promoted the induction of various subsets of T cells, some of which are correlated
with anti-inflammatory response.

Alidornase Alfa (PRX-110)

Alidornase alfa is our chemically-modified plant cell expressed recombinant human DNase I, administered through inhalation. Recombinant human DNase
I enzymatically cleaves DNA but its activity is inhibited by actin, which is present in the blood and other target organs. PRX-110 is designed to be less
susceptible to actin inhibition and have higher affinity to DNA, thus enhancing enzymatic activity. In-vitro studies have shown PRX-110 to have a highly
improved catalytic efficiency and affinity to DNA, compared to dornase alfa (Pulmozyme®, currently the only commercially available DNase therapy),
even more so in the presence of actin. We are currently evaluating PRX-110 for additional alternative indications.

We completed a phase I clinical trial of PRX-110 with 18 healthy volunteers, in whom alidornase alfa was found to be well tolerated.

In July 2016, we commenced a phase IIa clinical trial of PRX-110 for the treatment of Cystic Fibrosis, and we released the final results of the study in April
2017. Sixteen patients were enrolled in the study, all of whom completed the study. The phase IIa clinical trial was a 28-day switchover study to evaluate
the safety and efficacy of PRX-110 in Cystic Fibrosis patients previously treated with Pulmozyme (dornase alfa). Participation in the trial was preceded by
a two-week washout period from Pulmozyme before treatment with PRX-110 via inhalation.

Primary efficacy results from the phase IIa study demonstrated clinically meaningful lung function improvement following treatment with PRX-110, as
demonstrated by a mean absolute improvement in the percent predicted forced expiratory volume in one second (ppFEV1) of 3.4 points from baseline.
Moreover, a mean absolute increase in ppFEV1 of 2.8 points was also observed in patients participating in the study when compared to measurements
taken from patients at initiation, before the switch from Pulmozyme to PRX-110.

PRX-115

PRX-115 is our chemically-modified, plant cell expressed recombinant Uricase (Urate Oxidase), an enzyme in development for the treatment of Gout. Gout
is one of the most common forms of inflammatory arthritis and is caused by accumulation of excess urate crystals (monosodium urate) in joint fluid,
cartilage, bones, tendons, bursas, and other sites. Symptoms include swelling of the joints and pain during gout attacks, known as acute gouty arthritis. The
frequency and duration of acute attacks may increase over time, in certain patients, and lead to chronic gout, which may be associated with deposits of uric
acid crystals known as tophi. Gout can result from diet or genetic predisposition and environmental factors.

Uricase enzyme converts uric acid to allantoin, which is easily eliminated through urine. To date, two variants of recombinant uricases are approved for
marketing: (i) Krystexxa® for treatment of chronic Gout (no longer approved in the European Union) and (ii) Elitek® for treatment of tumor lysis
syndrome. Both have a black box warning for anaphylaxis, induce strong immunogenic reactions and have other major side-effects. We are developing
PRX-115 to have an improved half-life, reduced immunogenicity and improved efficacy and therapeutic value.

Intellectual Property

We have a robust patent portfolio, which is a key element of our overall strategy. We work to continually enhance, strengthen, and protect our Intellectual
Property (IP) and now hold a broad portfolio of more than 85 patents globally, including Europe, the United States, Israel and additional countries
worldwide. Our patents are designed to protect our proprietary technology, proprietary products and product candidates, and their methods of use.
Additionally, we have more than 40 pending patent applications.

During 2019, we received patents in Canada, India and the United States for the patent family named “Large Scale Disposable Bioreactor,” adding to the 10
previously granted patents in this family. We also received patents in India, Canada and the United States for the patent family named “Stabilized Alpha-
Galactosidase and Uses Thereof,” adding to the 18 patents previously granted in this family. We received patents in the United States and India for the
patent family named “Nucleic Acid Construct for Expression of Alpha-Galactosidase in Plants and Plant Cells,” adding to the seven previously granted
patents in this family. In addition, national phase filings were performed in certain countries worldwide for the patent family named “Therapeutic Regimen
for the Treatment of Fabry using Stabilized Alpha-Galactosidase.” An Israeli patent was granted for the patent family named “Dry Powder Formulations of
DNAse,” adding to the already granted U.S. patent in this family. An Israeli patent was also granted for the patent family named “Inhalable Liquid
Formulations of DNase,” adding to the already granted U.S. patent in this family. We also received a patent in Europe for the patent family TNF alpha
Inhibitor Polypeptides, Polynucleotides Encoding Same, Cells Expressing Same and Methods of Producing Same, adding to the three previously granted
patents in this family. Two patents were granted in Israel and Japan for the family “Use of Plant Cells Expressing a TNF alpha Polypeptide Inhibitor in
Therapy,” which is jointly owned with and licensed from Hadasit, adding to the three previously granted patents in this family.

Our competitive position and future success depend in part on our ability, and that of our licensees, to obtain and leverage the intellectual property covering
our product candidates, know-how, methods, processes and other technologies, to protect our trade secrets, to prevent others from using our intellectual
property and to operate without infringing on the intellectual property of third parties. We seek to protect our competitive position by filing United States,
European Union, Israeli and other foreign patent applications covering our technology, including both new technology and improvements to existing
technology. Our patent strategy includes obtaining patents on methods of production, compositions of matter and methods of use. We also rely on know-
how, continuing technological innovation, licensing and partnership opportunities to develop and maintain our competitive position.

Our outstanding 2021 Notes are guaranteed by our subsidiaries and secured by perfected liens on all of our material assets, primarily consisting of our
intellectual property assets, including a stock pledge of our foreign subsidiaries in favor of the holders of outstanding 2021 Notes.

As of December 31, 2019, our patent portfolio consisted of several patent families (consisting of patents and/or patent applications) covering our
technology, protein expression methodologies and system and product candidates, as follows:

Patent Name/Int. App. No.
Production of High Mannose Proteins in Plant
Culture/PCT/ Il2004 / 000181

Global Pending Jurisdictions(1)

Brazil

Granted Jurisdictions
Japan, Israel, Canada, Russian Federation,
Mexico, India, Australia, South Africa,
Republic of Korea, Singapore, Europe, Hong
Kong, Ukraine, China, USA

Nominal
Expiry

2024(2)

Cell/Tissue Culturing Device, System and
Method/PCT/Il2005/ 000228

System and Method for Production of Antibodies
in Plant Cell Culture/ PCT/Il2005/001075

Mucosal or Enteral Administration of Biologically
Active Macromolecules/PCT/Il2006/ 000832

Saccharide-containing Protein Conjugates and uses
thereof/PCT/ Il2008/001143

N/A

Israel

USA, Israel

Europe, Israel

USA

Large Scale Disposable Bioreactor/
PCT/Il2008/000614

Brazil, [Europe], [Israel]

Stabilized Alpha-galactosidase and uses
thereof/PCT/Il2011/000209

Brazil, [India], [Israel], [USA]

Australia, Canada, China, Europe, Hong
Kong, India, Israel, Republic of Korea,
Russian Federation, Singapore, South
Africa, USA

Canada, South Africa, Russian Federation,
Singapore, Israel, New Zealand, Republic of
Korea, Australia, China, Japan, USA,
Europe, Hong Kong, India

2025

2026

2028

2028(3)

2031

Nucleic Acid Construct for Expression of Alpha-
galactosidase in Plants and Plant Cells/PCT/
Il2011/000719

Brazil

India, China, Republic of Korea, Japan,
Israel, Europe, Hong Kong, USA

2024(2)

Therapeutic Regimen For The Treatment of Fabry
Using Stabilized Alpha-galactosidase/
PCT/Il2018/050018

USA, Europe, Brazil, Japan, Canada,
Australia, Chile, Israel, South Africa,
Republic of Korea, China, New Zealand,
Russian Federation, Mexico

N/A

Israel, Brazil

N/A

Israel, USA

Europe

Dry Powder Formulations of DNase
1/PCT/Il2013/050094

DNase I Polypeptides, Polynucleotides Encoding
Same, Methods of Producing DNase I and uses
thereof in Therapy/PCT/ Il2013/050097

Inhalable Liquid Formulations of DNase
I/PCT/Il2013/050096

Modified DNase and uses thereof/
PCT/Il2016/050003

Chimeric Polypeptides, Polynucleotides Encoding
Same, Cells Expressing Same and Methods of
Producing Same/PCT/ Il2014/050227

TNF Alpha Inhibitor Polypeptides,
Polynucleotides Encoding Same, Cells Expressing
Same and Methods of Producing Same/PCT/
IL2014/050228

Use of Plant Cells Expressing a TNF Alpha
Polypeptide Inhibitor in
Therapy/PCT/IL2014/050231

Chimeric Polypeptides, Polynucleotides Encoding
Same, Cells Expressing Same and Methods of
Producing Same

N/A

Israel, USA

USA, Europe, Canada, China, Australia,
New Zealand, South Africa, Israel,
Mexico, Hong Kong

USA

N/A

China, Brazil, Canada, USA

Australia, Japan, Europe, Israel

2034

Israel, China, Japan, Brazil, Canada

USA, Europe, Australia

2034

N/A

USA

2035

N/A

2033

N/A

(1) Countries in brackets are those for which we have a patent pending and a granted patent for the same family.
(2) Patent granted in Australia expires in 2029.
(3) Patent granted in the United States expires in 2032.

We are aware of U.S. patents, and corresponding international counterparts of such patents, owned by third parties that contain claims covering methods of
producing glucocerebrosidase. We do not believe that, if any claim of infringement were to be asserted against us based upon such patents, taliglucerase
alfa would be found to infringe any valid claim under such patents. However, there can be no assurance that a court would find in our favor or that, if we
choose or are required to seek a license to any one or more of such patents, a license would be available to us on acceptable terms or at all.

In April 2005, Protalix Ltd. entered into a license agreement with Icon Genetics AG, or Icon, pursuant to which we received an exclusive worldwide
license to develop, test, use and commercialize Icon’s technology to express certain proteins in our ProCellEx protein expression system. We are also
entitled to a non-exclusive worldwide license to make and have made other proteins expressed by using Icon’s technology in our technology. As
consideration for the license, we are obligated to make royalty payments equal to varying low, single-digit percentages of net sales of products by us, our
affiliates, or any sublicensees under the agreement. In addition, we are obligated to make milestone payments equal to $350,000, in the aggregate, for each
product developed under the license, upon the achievement of certain milestones.

Our license agreement with Icon remains in effect until the earlier of the expiration of the last patent under the agreement or, if all of the patents under the
agreement expire, 20 years after the first commercial sale of any product under the agreement. Icon may terminate the agreement upon written notice to us
that we are in material breach of our obligations under the agreement and we are unable to remedy such material breach within 30 days after we receive
such notice. Further, Icon may terminate the agreement in connection with certain events relating to a wind up or bankruptcy, if we make a general
assignment for the benefit of our creditors, or if we cease to conduct operations for a certain period. Icon may also terminate the exclusivity granted to us
by written notice if we fail to reach certain milestones within a designated period of time. Notwithstanding the termination date of the agreement, our
obligation to pay royalties to Icon under the agreement may expire prior to the termination of the agreement, subject to certain conditions.

Competition

The biotechnology and pharmaceutical industries are characterized by rapidly evolving technology and significant competition. Competition from
numerous existing companies and others entering the fields in which we operate is intense and expected to increase. Most of these companies have
substantially greater research and development, manufacturing, marketing, financial, technological personnel and managerial resources than we do. In
addition, many specialized biotechnology companies have formed collaborations with large, established companies to support research, development and
commercialization of products that may be competitive with our current and future product candidates and technologies. Acquisitions of competing
companies by large pharmaceutical or biotechnology companies could further enhance such competitors financial, marketing and other resources.
Academic institutions, governmental agencies and other public and private research organizations are also conducting research activities and seeking patent
protection and may commercialize competitive products or technologies on their own through collaborations with pharmaceutical and biotechnology
companies.

With respect to Gaucher disease, we face competition from Sanofi Genzyme (Cerezyme and Cerdelga®) and Takeda Shire (Vpriv). In addition, Actelion
markets a small molecule drug for the treatment of Gaucher disease (Zavesca or miglustat), an oral treatment approved by the FDA only for patients who

cannot be treated through ERT due to its side effects.

With respect to Fabry disease, we face competition from Sanofi Genzyme (Fabrazyme), Takeda Shire (Replagal) and Amicus (GalafoldTM). In addition, we
are aware of other late clinical stage, early clinical stage and experimental drugs which are being developed for the treatment of Fabry disease by other
companies.

With respect to IBD, we face competition from AbbVie Inc. (Humira®), Johnson & Johnson (Remicade®, Simpoint® and Stelara®), Pfizer (Xeljanz®), and
Takeda (Entyvio®). In addition, we are aware of other clinical stage, early clinical stage and experimental anti-TNF drugs.

With respect to Gout, we face competition from allopurinol, a generic drug, febuxostat, which is marketed globally by a number of different companies,
and from Horizon Pharma (Krsytexxa). In addition, we are aware of other clinical stage, early clinical stage and experimental Gout treatments.

We also face potential competition to our ProCellEx system from companies that are developing other platforms for the expression of recombinant
therapeutic pharmaceuticals. We are aware of companies that are developing alternative technologies to develop and produce therapeutic proteins in
anticipation of the expiration of certain patent claims covering marketed proteins. Competitors developing alternative expression technologies include
Crucell N.V. (which was acquired by Johnson & Johnson in 2010), Shire and GlycoFi, Inc. (which was acquired by Merck & Co. Inc.). Other companies
developing alternate plant-based technologies include iBio, Inc., Medicago, Inc., and Greenovation Biotech GmbH. Unlike ProCellEx, these alternate
technologies are not cell-based. These companies base their product development on transgenic plants or whole plants.

Agreements and Partnerships

Elelyso - Pfizer

We have licensed to Pfizer the global rights to Elelyso in all markets, excluding Brazil pursuant to an Amended and Restated Exclusive License and Supply
Agreement, or the Amended Pfizer Agreement, which we entered into with Pfizer in October 2015 to amend and restate our initial Exclusive License and
Supply Agreement with Pfizer, or the Pfizer Agreement. Pursuant to the Amended Pfizer Agreement, Pfizer retains 100% of revenue and reimburses 100%
of direct costs. For the first 10-year period after the execution of the Amended Pfizer Agreement, we have agreed to sell drug substance to Pfizer for the
production of Elelyso, subject to certain terms and conditions, and Pfizer maintains the right to extend the supply period for up to two additional 30-month
periods, subject to certain terms and conditions. Any failure to comply with our supply commitments may subject us to substantial financial penalties. The
Amended Pfizer Agreement includes customary provisions regarding cooperation for regulatory matters, patent enforcement, termination, indemnification
and insurance requirements. We maintain distribution rights to Elelyso in Brazil through a supply and technology transfer agreement with Fiocruz.

Elelyso - Fundação Oswaldo Cruz (Fiocruz)

Elelyso, marketed as BioManguinhos alfataliglicerase in Brazil, is commercialized in Brazil through the Brazil Agreement with Fiocruz. We receive direct
revenues from the Brazilian government. Gaucher patients are entitled to receive ERT paid for by the Brazilian MoH. The Brazilian MoH clinical treatment
guidelines state that BioManguinhos alfataliglicerase is the therapy of choice for newly diagnosed patients. BioManguinhos alfataliglicerase is currently
estimated to be used by approximately 25% of Gaucher patients in Brazil.

The Brazil Agreement became effective in January 2014. The technology transfer is designed to be completed in four stages and is intended to transfer to
Fiocruz the capacity and skills required for the Brazilian government to construct its own manufacturing facility, at its sole expense, and to produce a
sustainable, high-quality, and cost-effective supply of BioManguinhos alfataliglicerase. The initial term of the technology transfer is seven years. The
agreement contains certain purchase commitments by Fiocruz. Fiocruz’s purchases of BioManguinhos alfataliglicerase to date have been significantly
below certain agreed-upon purchase milestones. We continue to supply BioManguinhos alfataliglicerase to Fiocruz and patients continue to be treated with
BioManguinhos alfataliglicerase in Brazil. We are discussing with Fiocruz potential actions that Fiocruz may take to comply with its purchase obligations
and, based on such discussions, we will determine what we believe to be the course of action that is in the best interest of our company.

The Brazil Agreement may be extended for an additional five-year term, as needed, to complete the technology transfer. Upon completion of the
technology transfer, and subject to Fiocruz receiving approval from the Brazilian Health Regulatory Agency, or ANVISA, to manufacture taliglucerase alfa
in its facility in Brazil, the agreement will enter into the final term and will remain in effect until our last patent in Brazil expires. During this period,
Fiocruz will be the sole provider of this important treatment option for Gaucher patients in Brazil and will pay us a single-digit royalty on net sales.

PRX-102 – Chiesi Farmaceutici

We have entered into two exclusive global licensing and supply agreements for PRX-102 for the treatment of Fabry disease with Chiesi. The agreements
have significant revenue potential for Protalix. Under the agreements, Protalix Ltd. has received $50.0 million in upfront payments and was entitled to
development cost reimbursements of up to $45 million, up to more than $1.0 billion in potential milestone payments and tiered royalties of 15% - 35% (ex-
US) and 15% - 40% (US).

On October 19, 2017, Protalix Ltd. and Chiesi entered into the Chiesi Ex-US Agreement pursuant to which Chiesi was granted an exclusive license for all
markets outside of the United States to commercialize PRX-102. Under the Chiesi Ex-US Agreement, Chiesi made an upfront payment to Protalix Ltd. of
$25.0 million in connection with the execution of the agreement, and Protalix Ltd. was entitled to additional payments of up to $25.0 million in
development costs in the aggregate, capped at $10.0 million per year. Protalix Ltd. is also eligible to receive additional payments of up to a maximum of
$320.0 million in regulatory and commercial milestone payments. Protalix Ltd. agreed to manufacture all of the PRX-102 needed for all purposes under the
agreement, subject to certain exceptions, and Chiesi will purchase PRX-102 from Protalix Ltd., subject to certain terms and conditions. Chiesi is required to
make tiered payments of 15% to 35% of its net sales, depending on the amount of annual sales, as consideration for the supply of PRX-102.

On July 23, 2018, Protalix Ltd. entered into the Chiesi US Agreement with respect to the development and commercialization of PRX-102 in the United
States. Protalix Ltd. received an upfront, non-refundable, non-creditable payment of $25.0 million from Chiesi and was entitled to additional payments of
up to a maximum of $20.0 million to cover development costs for PRX-102, subject to a maximum of $7.5 million per year. Protalix Ltd. is also eligible to
receive additional payments of up to a maximum of $760.0 million, in the aggregate, in regulatory and commercial milestone payments. Chiesi will also
make tiered payments of 15% to 40% of its net sales under the Chiesi US Agreement to Protalix Ltd., depending on the amount of annual sales, subject to
certain terms and conditions, as consideration for product supply.

Scientific Advisory Board

Our Scientific Advisory Board is comprised of highly regarded, recognized key opinion leaders in the biotechnology field who bring valuable experience
and insight to our company. Our Scientific Advisory Board is available to consult with our management within their professional areas of expertise,
exchange strategic and business development ideas with our management, attend scientific, medical and business meetings with our management, such as
meetings with the FDA and comparable foreign regulatory authorities, attend meetings with existing or potential strategic partners that are relevant to their
areas of expertise; and attend meetings of our Scientific Advisory Board. Our Scientific Advisory Board currently includes the following people:

Roger D. Kornberg, Ph.D. (Chairman)

Laureate of the Nobel Prize in Chemistry

Name

Affiliations (selected)

Member, U.S. National Academy of Sciences

Winzer Professor of Medicine, Department of Structural Biology at Stanford
University

2001 Welch Prize (highest award granted in the field of chemistry in the
United States)

2002 Leopold Mayer Prize (the highest award granted in the field of
biomedical sciences from the French Academy of Sciences)

Professor Aaron Ciechanover, M.D., D.Sc.

Laureate of the Nobel Prize in Chemistry

Alexander Levitzki, Ph.D.

Charles J. Arntzen, Ph.D.

Distinguished research Professor at the Cancer and Vascular Biology
Research Center of the Rappaport Research Institute and Faculty of Medicine
at the Technion, Israel’s Institute of Technology

American Academy of Arts and Sciences, Member

Wolfson Family Professor of Biochemistry in the Department of Biological
Chemistry of The Alexander Silberman Institute of Life Sciences, Hebrew
University of Jerusalem

American Association for Cancer Research, 2013 Award for Outstanding
Achievement in Chemistry in Cancer Research.

1990 Israel Prize in Biochemistry

1990 Rothschild Prize in Biology

2002 Hamilton-Fairley Award, European Society of Medical Oncology

2005 Wolf Prize for Medicine

2012 Nauta Award in Pharmacochemistry, The European Federation of
Medicinal Chemistry (EFMC) (the highest award from the European
Federation for Medicinal Chemistry)

Regent’s Profession and Florence Ely Nelson Presidential Chair
Biodesign Institute, CIDV, Arizona State University

Member, National Academy of Sciences, USA

American Society of Plant Biology Leadership in Science Public Service
Award (2004)

Botanical Society of America Centennial Award (2006)

Fellow of American Society of Plant Biologists (2007)

Doctor of Science honoris causa., Hebrew University of Jerusalem

Chair, Section O “Agriculture, Food, and Renewable Resources,” American
Association for the Advancement of Science (AAAS) (2011-2012)

Manufacturing

We use our current facility in Carmiel, Israel, which has approximately 12,900 sq/ft of clean rooms built according to industry standards, to manufacture
drug substance for Elelyso, pegunigalsidase alfa and other recombinant proteins for commercial use and phase III clinical trials. We maintain an
approximately 3,800 sq/ft pilot plant for protein development and to manufacture supplies for clinical trials (phase I and phase II). Elelyso, pegunigalsidase
alfa and our other drug product candidates must be manufactured in a sterile environment and in compliance with cGMPs set by the FDA and other
relevant foreign regulatory authorities. We are currently producing PRX-102 drug substance for our phase III and other clinical trials, as well as the
manufacture of the Elelyso we need in the near future, including the Elelyso to be purchased by Pfizer under the Amended Pfizer Agreement. In addition,
we intend to use our manufacturing space to produce all of the drug substance needed in connection with the clinical trials for our product candidates.

In 2017, the FDA approved the supplemental New Drug Application (sNDA) we submitted to allow us to convert our manufacturing facility from a single
dedicated product facility to a multi-product facility. This conversion allows us to realize potentially significant operational savings. Our facility’s current
capacity can serve all of our current and expected commercial and clinical needs, and we believe it will be sufficient to serve our production needs for the
anticipated commercialization of pegunigalsidase alfa.

Our manufacturing facilities have undergone successful inspections by the FDA, the Irish Medicines Board (under the EMA’s centralized marketing
authorization procedure), ANVISA, the Israeli Ministry of Health, the Turkish Ministry of Health, the Australian TGA and Health Canada.

Our current facility in Israel has been granted “Approved Enterprise” status, and we have elected to participate in the alternative benefits program. Our
facility is located in a Zone A location, and, therefore, our income from the Approved Enterprise will be tax exempt in Israel for a 10-year period,
commencing with the year in which we first generate taxable income from the relevant Approved Enterprise and after we use our net operating loss
carryforwards, or NOLs. We expect to be entitled to similar tax benefits for a number of years thereafter. To remain eligible for these tax benefits, we must
continue to meet certain conditions, and if we increase our activities outside of Israel, for example, by future acquisitions, such increased activities
generally may not be eligible for inclusion in Israeli tax benefit programs. In addition, our technology is subject to certain restrictions with respect to the
transfer of technology and manufacturing rights.

Raw Materials and Suppliers

We believe that the raw materials that we require throughout the manufacturing process of Elelyso and our other current and potential drug product
candidates are widely available from numerous suppliers and are generally considered to be generic industrial biological supplies. We rely on a single,
approved supplier for certain materials relating to the current expression of our proprietary biotherapeutic proteins through ProCellEx. We have identified
additional suppliers for most of the materials required for the production of our product candidates.

Development and regulatory approval of our pharmaceutical products are dependent upon our ability to procure active ingredients and certain packaging
materials from sources approved by the FDA and other regulatory authorities. The FDA and other regulatory approval processes require manufacturers to
specify their proposed suppliers of active ingredients and certain packaging materials in their applications. From time to time, we intend to continue to
identify alternative FDA-approved suppliers to ensure the continued supply of necessary raw materials.

Government Regulations

U.S. Drug Development Process

The FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations. Drugs are also subject to other
federal, state and local statutes and regulations. Biologics are subject to regulation by the FDA under the FDCA, the Public Health Service Act, or the
PHSA, and related regulations and other federal, state and local laws and regulations. Biological products include a wide variety of products including
vaccines, blood and blood components, gene therapies, tissue and proteins. Unlike most prescription products made through chemical processes, biological
products generally are made from human and/or animal materials. To be lawfully marketed in interstate commerce, a biologic product must be the subject
of a BLA issued by the FDA on the basis of a demonstration that the product is safe, pure and potent, and that the facility in which the product is
manufactured meets standards to assure that it continues to be safe, pure and potent. The FDA has developed and is continuously updating the requirements
with respect to cell and gene therapy products and has issued documents concerning the regulation of cellular and tissue-based products. Manufacturers of
cell and tissue-based products must comply with the FDA’s current good tissue practices, or cGTP, which are FDA regulations that govern the methods
used in, and the facilities and controls used for, the manufacture of such products. The primary intent of the cGTP requirements is to ensure that cell and
tissue-based products are manufactured in a manner designed to prevent the introduction, transmission and spread of communicable disease.

The process of obtaining regulatory approvals and ensuring compliance with appropriate federal, state and local statutes and regulations in the United
States, and foreign statutes and regulations, requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S.
requirements at any time during the product development process, approval process, or after approval, may subject an applicant to administrative or judicial
sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning letters,
product recalls, product seizures, product detention, total or partial suspension of production or distribution, injunctions, fines, refusals of government
contracts, restitution, disgorgement or civil or criminal penalties. The process required by the FDA before a biological product or drug may be marketed in
the United States generally involves the following:

Completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices or other
regulations;
Submission to the FDA of an investigational new drug application, or IND, which must become effective before human clinical trials
may begin;

·
·

Performance of adequate and well-controlled clinical trials according to Good Clinical Practices, or GCP, to establish the safety and
efficacy of the proposed biological product or drug for its intended use;
Submission to the FDA of a BLA for a new biological product or a new drug application, or NDA, for a new drug;
Satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess
compliance with Good Manufacturing Practices, or cGMP, to assure that the facilities, methods and controls are adequate to preserve the
drug’s or biologic’s identity, strength, quality and purity; and
FDA review and approval of the BLA or NDA.

All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. These regulations
include the requirement that all subjects participating in the clinical trial provide their informed consent regarding the trial. Further, an institutional review
board, or IRB, must review and approve the plan for any clinical trial before it commences at any institution. An IRB considers, among other things,
whether the risks to individuals participating in the trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the
information regarding the clinical trial and the consent form that must be provided to each clinical trial subject, or his or her legal representative, and must
monitor the clinical trial until completed. Once an IND is in effect, each new clinical protocol and any amendments to the protocol must be submitted to the
FDA for review, and to the IRBs for approval.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

Phase I. The product is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism,
distribution and excretion. In the case of some products for severe or life-threatening diseases, especially when the product may be too
inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients having the specific
disease.
Phase II. Phase II clinical trials involve investigations in a limited patient population to identify possible adverse effects and safety risks,
to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and the optimal
dosage and schedule.
Phase III. Phase III clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population
at geographically dispersed clinical trial sites. These trials are intended to establish the overall risk/benefit ratio of the product and
provide an adequate basis for regulatory approval and product labeling.

Post-approval studies, also called Phase IV trials, may be conducted after initial marketing approvals. These studies are used to obtain additional
experience from the treatment of patients in the intended therapeutic indication and may be required by the FDA as part of the approval process.

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and safety reports must be submitted to the FDA
and the investigators for serious and unexpected side effects. Phase I, Phase II and Phase III testing may not be completed successfully within any specified
period, if at all. The FDA or the trial sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the study
subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution
if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product candidate has been associated with unexpected
serious harm to patients.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and
physical characteristics of the product and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP
requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the
manufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be
selected and tested and stability studies must be conducted to demonstrate that the applicable product candidate does not undergo unacceptable
deterioration over its shelf life.

The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted
on the product candidate, proposed labeling and other relevant information, are submitted to the FDA as part of an NDA or BLA, requesting approval to
market the product. The submission of an NDA or BLA is subject to the payment of substantial user fees which may be waived under certain limited
circumstances.

The testing and approval processes require substantial time and effort and approval on a timely basis, if at all. The FDA may refuse to approve a BLA or
NDA if the applicable regulatory criteria are not satisfied or may require additional clinical data or other data and information. Generally, it takes one to
three years to obtain approval. If questions arise during the FDA review process, approval may take a significantly longer period of time.

If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may
otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or
precautions be included in the product labeling. In addition, the FDA may require Phase IV testing which involves clinical trials designed to further assess
a drug’s or biologic’s safety and effectiveness after BLA or NDA approval and may require testing and surveillance programs to monitor the safety of
approved products that have been commercialized.

Orphan Drug Designation

Under the Orphan Drug Act of 1983, the FDA may grant orphan drug designation to drugs and biological products intended to treat a rare disease or
condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States or that affect more than 200,000 persons
in the United States but that sales in the United States are not expected to recover the costs of developing and marketing a treatment drug. Orphan product
designation does not convey any advantage in or shorten the duration of the regulatory review and approval process. Among the benefits of orphan drug
designation are possible funding and tax savings to support clinical trials and for other financial incentives and a waiver of the marketing application user
fee.

If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the
product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same treatment for the
same indication for seven years, except in limited circumstances, such as (i) the drug’s orphan designation is revoked; (ii) its marketing approval is
withdrawn; (iii) the orphan exclusivity holder consents to the approval of another applicant’s product; (iv) the orphan exclusivity holder is unable to assure
the availability of a sufficient quantity of drug; or (v) a showing of clinical superiority to the product with orphan exclusivity by a competitor product.
Competitors, however, may receive approval of different products for the indication for which the orphan product has exclusivity or obtain approval for the
same product but for a different indication for which the orphan product has exclusivity. Orphan drug status in the European Union has similar but not
identical benefits in the European Union.

In December 2017, the European Commission granted Orphan Drug Designation to PRX-102 for the treatment of Fabry disease.

Patent Term Restoration and Marketing Exclusivity

Depending upon the timing, duration and specifics of FDA marketing approval of our product candidate, some of our U.S. patents may be eligible for
limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman
Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product
development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14
years from the product’s approval date. The patent term restoration period is generally one-half the time between (a) the effective date of an IND and the
submission date of a BLA or an NDA plus (b) the time between the submission date of a BLA or an NDA and the approval of that application. Only one
patent applicable to an approved drug is eligible for the extension and the extension must be requested prior to expiration of the patent. The U.S. Patent and
Trademark Office, or USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. We
anticipate that we will apply for restorations of the patent term for certain of patents covering our product candidates.

Fast Track Designation

The FDA has a fast track program that is designed to facilitate the development and expedite the review of drugs to treat serious conditions and fill an
unmet medical need, the purpose being to make important new drugs available to patients earlier. A drug candidate that receives Fast Track designation
from the FDA is eligible for some or all of the following: more frequent meetings with the FDA to discuss the drug’s development plan and ensure
collection of appropriate data needed to support drug approval; more frequent written communication from the FDA about such things as the design of the
proposed clinical trials; eligibility for the FDA’s Accelerated Approval and Priority Review, if relevant criteria are met; and eligibility for Rolling Review,
which allows a drug company to submit completed sections of its BLA or NDA for review by the FDA, rather than waiting until every section of the BLA
or NDA is completed before the entire application can be reviewed. BLA or NDA review usually does not begin until the drug company has submitted the
entire application to the FDA. We used the Rolling Review option for our taliglucerase alfa NDA, which we completed in April 2010.

In January 2018, the FDA granted Fast Track designation to PRX-102.

Accelerated Approval

In 2012, the U.S. Congress passed the Food and Drug Administration Safety Innovations Act, or the FDASIA. Section 901 of the FDASIA amends the
FDCA to allow the FDA to base Accelerated Approval for drugs for serious conditions that fill an unmet medical need on whether the drug has an effect on
a surrogate or an intermediate clinical endpoint. A surrogate endpoint used for Accelerated Approval is a marker; that is, a laboratory measurement,
radiographic image, physical sign or other measure, that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. An intermediate
clinical endpoint is a measure of a therapeutic effect that is considered reasonably likely to predict the clinical benefit of a drug, such as an effect on
irreversible morbidity and mortality. The FDA bases its decision on whether to accept the proposed surrogate or intermediate clinical endpoint on the
scientific support for that endpoint. Studies that demonstrate a drug’s effect on a surrogate or intermediate clinical endpoint must be “adequate and well
controlled” as required by the FDCA.

The Accelerated Approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required to
measure the intended clinical benefit of a drug, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. Under subpart H of the
Accelerated Approval pathway, the FDA may grant marketing approval for a new drug product on the basis of adequate and well-controlled clinical trials
establishing that the drug product has an effect on a surrogate endpoint that is reasonably likely, based on epidemiologic, therapeutic, pathophysiologic, or
other evidence, to predict clinical benefit or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity. The Accelerated
Approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify
and describe the drug’s clinical benefit. As a result, a drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements,
including the completion of Phase IV or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-
approval studies, or confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the drug from the market on an expedited
basis. All promotional materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA.

We anticipate that, in coordination with Chiesi, a BLA for PRX-102 will be filed with the FDA under the Accelerated Approval Pathway.

Post-Approval Requirements

Any drugs for which we receive FDA approval are subject to continuing regulation by the FDA, including, among other things, record-keeping
requirements, reporting of adverse effects with the product, reporting of changes in distributed products which would require field alert reports, or FARs,
drugs and biological product deviation reports, or BPDRs, providing the FDA with updated safety and efficacy information, product sampling and
distribution requirements, complying with certain electronic records and signature requirements and complying with FDA promotion and advertising
requirements. In September 2007, the Food and Drug Administration Amendments Act of 2007 was enacted, giving the FDA enhanced post-marketing
authority, including the authority to require post marketing studies and clinical trials (PMRs and PMCs), labeling changes based on new safety information,
and compliance with risk evaluations and mitigation strategies, or REMS, approved by the FDA. The FDA strictly regulates labeling, advertising,
promotion and other types of information on products that are placed on the market. Drugs and biologics may be promoted only for the approved
indications and in accordance with the provisions of the approved label. Further, manufacturers of drugs and biologics must continue to comply with cGMP
requirements, which are extensive and require considerable time, resources and ongoing investment to ensure compliance. In addition, changes to the
manufacturing process generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding
new indications and additional labeling claims, are also subject to further FDA review and approval.

Drug and biologic manufacturers and other entities involved in the manufacturing and distribution of approved drugs and biologics are required to register
their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for
compliance with cGMP, GTP applicable to biologics, and other laws. The cGMP requirements apply to all stages of the manufacturing process, including
the production, processing, sterilization, packaging, labeling, storage and shipment of the drug. Manufacturers must establish validated systems to ensure
that products meet specifications and regulatory standards, and test each product batch or lot prior to its release.

The FDA may withdraw a product approval if compliance with regulatory standards is not maintained or if problems occur after the product reaches the
market. Discovery of previously unknown problems with a product subsequent to its approval may result in restrictions on the product or even complete
withdrawal of the product from the market. Further, the failure to maintain compliance with regulatory requirements may result in administrative or judicial
actions, such as fines, warning letters, holds on clinical trials, product recalls or seizures, product detention or refusal to permit the import or export of
products, refusal to approve pending applications or supplements, restrictions on marketing or manufacturing, injunctions or civil or criminal penalties.

From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the approval,
manufacturing and marketing of products regulated by the FDA. In addition to new legislation, the FDA regulations and policies are often revised or
reinterpreted by the agency in ways that may significantly affect our business and our development efforts. It is impossible to predict whether further
legislative or FDA regulation or policy changes will be enacted or implemented and what the impact of such changes, if any, may be.

Foreign Regulation

We are subject to regulations and product registration requirements in many foreign countries in which we may sell our products, including in the areas of
product standards, packaging requirements, labeling requirements, import and export restrictions and tariff regulations, duties and tax requirements. The
time required to obtain clearance required by foreign countries may be longer or shorter than that required for FDA clearance, and requirements for
licensing a product in a foreign country may differ significantly from FDA requirements.

Pharmaceutical products may not be imported into, or manufactured or marketed in, the State of Israel absent drug registration. The three basic criteria for
the registration of pharmaceuticals in Israel is quality, safety and efficacy of the pharmaceutical product and the Israeli MOH requires pharmaceutical
companies to conform to international developments and standards. Regulatory requirements are constantly changing in accordance with scientific
advances as well as social and ethical values.

The relevant legislation of the European Union requires that medicinal products, including generic versions of previously approved products, and new
strengths, dosage forms and formulations, of previously approved products, shall have a marketing authorization before they are placed on the market in the
European Union. Authorizations are granted after the assessment of quality, safety and efficacy by the respective health authorities. In order to obtain an
authorization, an application must be made to the competent authority of the member state concerned or in a centralized procedure to the EMA. Besides
various formal requirements, the application must contain the results of pharmaceutical (physico-chemical, biological or microbiological) tests, of
preclinical (toxicological and pharmacological) tests as well as of clinical trials. All of these tests must have been conducted in accordance with relevant
EU regulations and must allow the reviewer to evaluate the quality, safety and efficacy of the medicinal product. Orphan drug designation in the European
Union is granted to medicinal products intended for the diagnosis, prevention and treatment of life-threatening diseases and very serious conditions that
affect not more than five in 10,000 people in the European Union. Orphan drug designation is generally given to medicinal products that treat conditions
for which no current therapy exists or are expected to bring a significant benefit to patients over existing therapies.

Third Party Payor Coverage and Reimbursement

Coverage and reimbursement status of any approved therapy carries uncertainty and risk. In both the United States and foreign markets, our ability to
commercialize our product and product candidates successfully, and to attract commercialization partners, depends in significant part on the availability of
adequate financial coverage and reimbursement from third party payors, including, in the United States, governmental payors such as Medicare, Medicaid
and the Veterans Affairs Health programs, and private health insurers. Medicare is a federally funded program managed by the Centers for Medicare and
Medicaid Services, or CMS, through local fiscal intermediaries and carriers that administer coverage and reimbursement for certain healthcare items and
services furnished to the elderly and disabled. Medicaid is an insurance program for certain categories of patients whose income and assets fall below state
defined levels and who are otherwise uninsured that is both federally and state funded and managed by each state. The federal government sets general
guidelines for Medicaid and each state creates specific regulations that govern its individual program. Each payor has its own process and standards for
determining whether it will cover and reimburse a procedure or particular product. Private payors often rely on the lead of the governmental payors in
rendering coverage and reimbursement determinations. Therefore, achieving favorable CMS coverage and reimbursement is usually a significant gating
issue for successful introduction of a new product. The competitive position of some of our products will depend, in part, upon the extent of coverage and
adequate reimbursement for such products and for the procedures in which such products are used. Prices at which we or our customers seek
reimbursement for our product candidates can be subject to challenge, reduction or denial by the government and other payors.

Possible legislation at the Federal and State levels in the United States focused on cost containment and price transparency may impact our ability to sell
our product and product candidates for maximum profitably. It appears likely that the pressure on pharmaceutical pricing will continue, especially under the
Medicare program, which may also increase our regulatory burdens and operating costs. Moreover, additional changes could be made to governmental
healthcare programs that could significantly impact the success of our product and product candidates.

Some third party payors also require pre-approval of coverage for new or innovative devices, biologics or drug therapies before they will reimburse
healthcare providers that use such therapies. While we cannot predict whether any proposed cost-containment measures will be adopted or otherwise
implemented in the future, the announcement or adoption of these proposals could have a material adverse effect on our ability to obtain adequate prices for
our product candidates and operate profitably.

Different pricing and reimbursement schemes exist in other countries. In the European Union, governments influence the price of pharmaceutical products
through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of those products to consumers.
Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed. To
obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost-effectiveness of a
particular product candidate to currently available therapies. Other member states allow companies to fix their own prices for medicines, but monitor and
control company profits. The downward pressure on health care costs in general, particularly prescription drugs and biologics, has become very intense. As
a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced
markets exert a commercial pressure on pricing within a country.

Other Healthcare Laws and Compliance Requirements

In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including the
Centers for Medicare and Medicaid Services, other divisions of the U.S. Department of Health and Human Services (e.g., the Office of Inspector General),
the U.S. Department of Justice and individual U.S. Attorney General offices within the Department of Justice, and state and local governments. These
regulations include:

the federal healthcare program anti-kickback law, which prohibits, among other things, persons from soliciting, receiving or providing
remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a
good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;

federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be
presented, claims for payment from Medicare, Medicaid, or other government reimbursement programs that are false or fraudulent;

the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which prohibits executing a scheme to defraud any
healthcare benefit program or making false statements relating to healthcare matters and which also imposes certain requirements relating
to the privacy, security and transmission of individually identifiable health information;

the federal transparency requirements under the Health Care Reform Law requires manufacturers of drugs, devices, biologics, and
medical supplies to report to the Department of Health and Human Services information related to physician payments and other transfers
of value and physician ownership and investment interests;

the FDCA, which among other things, strictly regulates drug and biologic product marketing, prohibits manufacturers from marketing
drug products for off-label use and regulates the distribution of drug samples; and

state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services
reimbursed by any third-party payor, including commercial insurers, and state laws governing the privacy and security of health
information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by federal
laws, thus complicating compliance efforts.

Compliance with Environmental, Health and Safety Laws

In addition to FDA regulations, we are also subject to evolving federal, state and local environmental, health and safety laws and regulations. In the past,
compliance with environmental, health and safety laws and regulations has not had a material effect on our capital expenditures. Compliance with
environmental, health and safety laws and regulations in the future may require additional capital expenditures.

Israeli Government Programs

The following is a brief summary of the current principal Israeli tax laws applicable to us and Protalix Ltd., and of the Israeli Government programs from
which Protalix Ltd. benefits. Some parts of this discussion are based on new tax legislation that has not been subject to judicial or administrative
interpretation. Therefore, the views expressed in the discussion may not be accepted by the tax authorities in question. This summary is based on laws and
regulations in effect as of the date hereof, and should not be construed as legal or professional tax advice and does not cover all possible tax considerations.

General Corporate Tax Structure in Israel

The income of Protalix Ltd., other than income from “Approved Enterprises,” is taxed in Israel at regular rates. Pursuant to the Economic Efficiency Law
(Legislative Amendments for Implementing the Economic Policy for the 2017 and 2018 Budget Year), 2016, the corporate tax rate in 2018 and thereafter is
23%. Capital gains on the sale of assets are subject to capital gains tax according to the corporate tax rate in effect in the year which the assets are sold.

Law for the Encouragement of Capital Investments, 1959

The Law for the Encouragement of Capital Investments, 1959, as amended, or the Investment Law, provides certain incentives for capital investments in a
production facility (or other eligible assets). Generally, an investment program that is implemented in accordance with the provisions of the Investment
Law, referred to as an “Approved Enterprise,” is entitled to benefits. These benefits may include cash grants from the Israeli government and tax benefits,
based upon, among other things, the location within Israel of the facility in which the investment is made and specific elections made by the grantee. In
order to qualify for these incentives, an Approved Enterprise is required to comply with the requirements of the Investment Law, and Letter of approval
received by Protalix Ltd.

Protalix Ltd. will continue to enjoy the tax benefits under the pre-revision provisions of the Investment Law. If any new benefits are granted to Protalix Ltd.
in the future, Protalix Ltd. will be subject to the provisions of the amended Investment Law with respect to these new benefits. Therefore, the following
discussion is a summary of the Investment Law prior to its amendment as well as the relevant changes contained in the new legislation.

Under the Investment Law prior to its amendment, a company that wished to receive benefits had to receive approval from the Authority for the Investment
and Development of the Industry and Economy, or the Investment Center. Each certificate of approval for an Approved Enterprise relates to a specific
investment program in the Approved Enterprise, delineated both by the financial scope of the investment and by the physical characteristics of the facility
or the asset, e.g., the equipment to be purchased and utilized pursuant to the program.

An Approved Enterprise may elect to forego any entitlement to the grants otherwise available under the Investment Law and, instead, participate in an
alternative benefits program under which the undistributed income (after deductions and offsets) from the Approved Enterprise is exempt from corporate
tax for a defined period of time. Under the alternative package of benefits, a company’s undistributed income derived from an Approved Enterprise will be
exempt from corporate tax for a period of between two and 10 years from the first year of taxable income, depending upon the geographic location within
Israel of the Approved Enterprise. Upon expiration of the exemption period, the Approved Enterprise is eligible for the reduced tax rates otherwise
applicable under the Investment Law for any remainder of the otherwise applicable benefits period (up to an aggregate benefits period of either seven or 10
years, depending on the location of the company or its definition as a foreign investors’ company). If a company has more than one Approved Enterprise
program or if only a portion of its capital investments are approved, its effective tax rate is the result of a weighted combination of the applicable rates. The
tax benefits from any certificate of approval relate only to taxable profits attributable to the specific Approved Enterprise and are contingent upon meeting
the criteria set out in the certificate of approval. Income derived from activity that is not integral to the activity of the Approved Enterprises (including
capital gain) does not enjoy these tax benefits.

A company that has an Approved Enterprise program is eligible for further tax benefits, as an alternative to exemption, if it qualifies as a foreign investors’
company. A foreign investors’ company eligible for benefits is essentially a company in which more than 25% of the share capital (in terms of shares,
rights to profit, voting and appointment of directors) is owned (measured by both share capital and combined share and loan capital) by non-Israeli
residents. A company that qualifies as a foreign investors’ company and has an Approved Enterprise program is eligible for tax benefits for a 10-year
benefit period and may enjoy a reduced corporate tax rate of 10% to 23%, depending on the amount of the company’s shares held by non-Israeli
shareholders.

If a company that has an Approved Enterprise program is a wholly-owned subsidiary of another company, the percentage of foreign investments is
determined based on the percentage of foreign investment in the parent company. The tax rates and related levels of foreign investments with respect to a
foreign investor’s company that has an Approved Enterprise program are set forth in the following table:

Percent of Foreign Ownership
Over 25% but less than 49%
49% or more but less than 74%
74% or more but less than 90%
90% or more

Rate of Reduced Tax
23%
20%
15%
10%

Our original facility in Israel has been granted “Approved Enterprise” status, and it has elected to participate in the alternative benefits program. Under the
terms of its Approved Enterprise program, the facility is located in a top priority location, or “Zone A,” and, therefore, the undistributed income from that
Approved Enterprise will be tax exempt in Israel for a period of 10 years, commencing with the year in which taxable income is first generated from the
relevant Approved Enterprise. The current benefits program may not continue to be available and Protalix Ltd. may not continue to qualify for its benefits.

A company that has elected to participate in the alternative benefits program and that subsequently pays a dividend out of the income derived from the
portion of its facilities that have been granted Approved Enterprise status during the tax exemption period will be subject to corporate tax in respect of the
amount of dividend distributed at the rate that would have been applicable had the company not elected the alternative benefits program (generally 10% to
23%, depending on the extent to which non-Israeli shareholders hold such company’s shares). If the dividend is distributed within 12 years after the end of
the benefits period (or, in the case of a foreign investor’s company, without time limitation), the dividend recipient is taxed at the reduced withholding tax
rate of 15% applicable to dividends from approved enterprises, or at the lower rate under an applicable tax treaty. After this period, the withholding tax rate
is 25% to 30%, or at the lower rate under an applicable tax treaty. In the case of a company with a foreign investment level (as defined by the Investment
Law) of 25% or more, the 12-year limitation on reduced withholding tax on dividends does not apply. The company must withhold this tax at its source,
regardless of whether the dividend is converted into foreign currency.

The Investment Law also provides that an Approved Enterprise is entitled to accelerated depreciation on its property and equipment that are included in an
approved investment program. This benefit is an incentive granted by the Israeli government regardless of whether the alternative benefits program is
elected.

The benefits available to an Approved Enterprise are conditioned upon terms stipulated in the Investment Law and its regulations and the criteria set forth
in the applicable certificate of approval. If Protalix Ltd. does not fulfill these conditions in whole or in part, the benefits can be canceled and Protalix Ltd.
may be required to refund the benefits received, linked to the Israeli consumer price index with interest. We believe that Protalix Ltd. currently operates in
compliance with all applicable conditions and criteria.

Amendment No. 60 to the Investment Law introduced a tax benefits regime referred to as “Benefitted Enterprises.” Under the Investment Law, the
approval of the Investment Center is required only for Benefitted Enterprises that receive cash grants. Benefitted Enterprises that do not receive benefits in
the form of governmental cash grants, but only tax benefits, are no longer required to obtain this approval. Instead, these Benefitted Enterprises are required
to make certain investments as specified in the Investment Law.

The amended Investment Law specifies certain conditions for a Benefitted Enterprise to be entitled to benefits. These conditions include, inter alia, the
following:

the Benefitted Enterprise’s revenues from any single country or a separate customs territory may not exceed 75% of the Benefitted
Enterprise’s total revenues; or

at least 25% of the Benefitted Enterprise’s revenues during the benefits period must be derived from sales into a single country or a separate
customs territory with a population of at least 14 million people (starting from January 1, 2012, 1.4% must be added for each year).

There can be no assurance that Protalix Ltd. will comply with the above conditions in the future or that Protalix Ltd. will be entitled to any additional
benefits under the Investment Law. In addition, it is possible that Protalix Ltd. may not be able to operate in a manner that maximizes utilization of the
potential benefits available under the Investment Law.

In the future there may be changes in the law, subject to the preservation of benefits, which may affect the benefits available to companies under the
Investment Law. The termination or substantial reduction of any of the benefits available under the Investment Law could impact our tax expenses.

Amendment of the Law for the Encouragement of Capital Investments, 1959

In recent years, several amendments have been made to the Investments Law which have enabled new alternative benefit tracks, subject to certain
conditions. The Investments Law was amended as part of the Economic Policy Law for the years 2011-2012 (amendment 68 to the Encouragement of
Capital Investments Law), which was passed by the Israeli Knesset on December 29, 2010. The amendment sets alternative benefit tracks to those currently
in effect under the provisions of the Investments Law. On December 29, 2016, Amendment 73 to the Investments Law, or the Investments Law
Amendment, was published. This amendment sets new benefit tracks, inter alia, “Preferred Technological Enterprise” and “Special Preferred Technological
Enterprise.” To date, we have elected not to have the Investments Law Amendment apply to our company.

Encouragement of Industrial Research, Development and Technology Innovation Law, 1984

To date, Protalix Ltd. has received grants from the OCS under the Israeli Law for the Encouragement of Industrial Research, Development and Technology
Innovation, 1984, and related regulations, or the Research Law. On January 1, 2016, the Israeli government established NATI which replaced many of the
functions of the Office of the Chief Scientist of the Israeli Department of Labor, or the OCS. For purposes of clarity, references to NATI will include the
OCS. NATI grants are made available to finance of a portion of Protalix Ltd.’s research and development expenditures in Israel. As of December 31, 2019,
NATI approved grants in respect of Protalix Ltd.’s continuing operations totaling approximately $53.2 million (before interest, as described below),
measured from inception. Protalix Ltd. is required to repay up to 100% of grants actually received (plus interest at the LIBOR rate applied to the grants
received on or after January 1, 1999) to NATI through payments of royalties at a rate of 3% to 6% of the revenues generated from NATI-funded project,
depending on the period in which revenues were generated. As of December 31, 2019, Protalix Ltd. either paid or accrued royalties payable of
$12.4 million and Protalix Ltd.’s contingent liability to NATI with respect to grants received was approximately $40.8 million.

Under the Research Law, recipients of grants from NATI are prohibited from manufacturing products developed using these grants outside of the State of
Israel without special approvals, although the Research Law does enable companies to seek prior approval for conducting manufacturing activities outside
of Israel without being subject to increased royalties. If Protalix Ltd. receives approval to manufacture the products developed with government grants
outside of Israel, it will be required to pay an increased total amount of royalties (possibly up to 300% of the grant amounts plus interest), depending on the
manufacturing volume that is performed outside of Israel, as well as at a possibly increased royalty rate.

Additionally, under the Research Law, Protalix Ltd. is prohibited from transferring NATI-financed technologies and related intellectual property rights
outside of the State of Israel, except under limited circumstances and only with the approval of NATI Council or the Research Committee. Protalix Ltd.
may not receive the required approvals for any proposed transfer and, if received, Protalix Ltd. may be required to pay NATI a portion of the consideration
that it receives upon any sale of such technology by a non-Israeli entity. The scope of the support received, the royalties that Protalix Ltd. has already paid
to NATI, the amount of time that has elapsed between the date on which the know-how was transferred and the date on which NATI grants were received
and the sale price and the form of transaction will be taken into account in order to calculate the amount of the payment to NATI. Approval of the transfer
of technology to residents of the State of Israel is required, and may be granted in specific circumstances only if the recipient abides by the provisions of
applicable laws, including the restrictions on the transfer of know-how and the obligation to pay royalties. No assurance can be made that approval to any
such transfer, if requested, will be granted.

Under the Research Law and the regulations promulgated thereunder, NATI Council may allow the transfer outside of Israel of know-how derived from an
approved program and the related manufacturing rights in limited circumstances which are currently as follows:

in the event of a sale of know-how itself to a non-affiliated third party, provided that upon such sale the owner of the know-how pays to
NATI an amount, in cash, as set forth in the Research Law (and the regulations promulgated thereunder). In addition, the amendment
provides that if the purchaser of the know-how gives the selling Israeli company the right to exploit the know-how by way of an exclusive,
irrevocable and unlimited license, the research committee may approve such transfer in special cases without requiring a cash payment.

in the event of a sale of a company which is the owner of know-how, pursuant to which the company ceases to be an Israeli company,
provided that upon such sale, the owner of the know-how makes a cash payment to NATI as set forth in the Research Law (and the
regulations promulgated thereunder).

in the event of an exchange of know-how such that in exchange for the transfer of know-how outside of Israel, the recipient of the know-how
transfers other know-how to the company in Israel in a manner in which NATI is convinced that the Israeli economy realizes a greater,
overall benefit from the exchange of know-how.

The Research Committee may, in special cases, approve the transfer of manufacture or of manufacturing rights of a product developed within the
framework of the approved program or which results therefrom, outside of Israel.

The State of Israel does not own intellectual property rights in technology developed with NATI funding and there is no restriction on the export of
products manufactured using technology developed with NATI funding. The technology is, however, subject to transfer of technology and manufacturing
rights restrictions as described above. For a description of such restrictions, please see “Risk Factors—Risks Relating to Our Operations in Israel.” NATI
approval is not required for the export of any products resulting from the research or development or for the licensing of any technology in the ordinary
course of business.

Law for the Encouragement of Industry (Taxes), 1969

We believe that Protalix Ltd. currently qualifies as an “Industrial Company” within the meaning of the Law for the Encouragement of Industry (Taxes),
1969, or the Industry Encouragement Law. The Industry Encouragement Law defines “Industrial Company” as a company resident in Israel and
incorporated in Israel, that derives 90% or more of its income in any tax year (other than specified kinds of passive income such as capital gains, interest
and dividends) from an “Industrial Enterprise” operating in Israel (including Judea & Samaria territories and the Gaza strip), that it owns. An “Industrial
Enterprise” is defined as an enterprise whose major activity in a given tax year is industrial production.

The following corporate tax benefits, among others, are available to Industrial Companies:

amortization of the cost of purchased know-how and patents over an eight-year period for tax purposes;

accelerated depreciation rates on equipment and buildings;

under specified conditions, an election to file consolidated tax returns with other related Israeli Industrial Companies; and

expenses related to a public offering are deductible in equal amounts over three years.

Eligibility for the benefits under the Industry Encouragement Law is not subject to receipt of prior approval from any governmental authority. It is possible
that Protalix Ltd. may fail to qualify or may not continue to qualify as an “Industrial Company” or that the benefits described above will not be available in
the future.

Tax Benefits for Research and Development

Under specified conditions, Israeli tax laws allow a tax deduction by a company for research and development expenditures, including capital expenditures,
for the year in which such expenditures are incurred. These expenditures must relate to scientific research and development projects and must be approved
by NATI. Furthermore, the research and development projects must be for the promotion of the company and carried out by or on behalf of the company
seeking such tax deduction. However, the amount of such deductible expenditures is reduced by the sum of any funds received through government grants
for the finance of such scientific research and development projects. Research and development expenses which were not approved shall be deductible over
a period of three years.

Employees

As of December 31, 2019, we had 196 employees, of whom 19 have a Ph.D. or an M.D. in their respective scientific fields. We believe that our relations
with these employees are good. We believe that our success will greatly depend on our ability to identify, attract and retain capable employees. The Israeli
Ministry of Labor and Welfare is authorized to make certain industry-wide collective bargaining agreements, or Expansion Orders, that apply to types of
industries or employees including ours. These agreements affect matters such as cost of living adjustments to salaries, length of working hours and week,
recuperation, travel expenses, and pension rights. Otherwise, our employees are not represented by a labor union or represented under a collective
bargaining agreement. See “Risk Factors—We depend upon key employees and consultants in a competitive market for skilled personnel. If we are unable
to attract and retain key personnel, it could adversely affect our ability to develop and market our products.”

Company Background

We were originally incorporated in the State of Florida in April 1992, and reincorporated in the State of Delaware in March 2016. Protalix Ltd., our wholly-
owned subsidiary and sole operating unit, is an Israeli company and was originally incorporated in Israel in 1993.

ProCellEx® is our registered trademark. Each of the other trademarks, trade names or service marks appearing in this Annual Report on Form 10-K belongs
to its respective holder.

Available Information

We make available on our website, www.protalix.com, free of charge, our Commission filings, including our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports, as soon as reasonably practicable after we electronically file
these documents with, or furnish them to, the Commission. Additionally, from time to time, we provide notifications of material news including press
releases and conferences on our website. Webcasts of presentations made by our company at certain conferences may also be available from time to time on
our website, to the extent the webcasts are available. The content of our website is not intended to be incorporated by reference into this report or in any
other report or document we file and any references to these websites are intended to be inactive textual references only.

We are also listed on the Tel Aviv Stock Exchange, or the TASE, and, accordingly, we submit copies of all our filings with the Commission to the Israeli
Securities Authority and the TASE. Such copies can be retrieved electronically through the TASE’s internet messaging system (www.maya.tase.co.il) and
through the MAGNA distribution site of the Israeli Securities Authority (www.magna.isa.gov.il).

Our website also includes printable versions of our Code of Business Conduct and Ethics and the charters for each of the Audit, Compensation and
Nominating Committees of our Board of Directors. Each of these documents is also available in print, free of charge, to any stockholder who requests a
copy by addressing a request to:

Protalix BioTherapeutics, Inc.
2 Snunit Street, Science Park
P.O. Box 455
Carmiel 2161401, Israel
Attn: Mr. Eyal Rubin, Sr. Vice President and Chief Financial Officer

Item 1A.

Risk Factors

You should carefully consider the risks described below together with the other information included in this Annual Report on Form 10-K. Our business,
financial condition or results of operations could be adversely affected by any of these risks. If any of these risks occur, the value of our common stock
could decline.

Risks Related to Clinical Trials and Regulatory Matters

We may not obtain the necessary U.S., EMA or other worldwide regulatory approvals to commercialize our drug candidates in a timely manner, if
at all, which would have a material adverse effect on our business, results of operations and financial condition.

We need FDA approval to commercialize our drug candidates in the United States, EMA approval to commercialize our drug candidates in the European
Union and approvals from other foreign regulators to commercialize our drug candidates elsewhere. In order to obtain FDA approval of any of our drug
candidates, we must submit to the FDA an NDA or a BLA demonstrating that the drug candidate is safe for humans and effective for its intended use. This
demonstration requires significant research and animal tests, which are referred to as preclinical studies, as well as human tests, which are referred to as
clinical trials. In the European Union, we must submit an MAA to the EMA. Satisfaction of the regulatory requirements of the FDA, EMA and other
foreign regulatory authorities typically takes many years, depends upon the type, complexity and novelty of the drug candidate and requires substantial
resources for research, development and testing. With respect to planned submission of a BLA to the FDA for pegunigalsidase alfa under the Accelerated
Approval pathway, the FDA may request additional data or other conditions of the submission. Even if we comply with all the requests of regulatory
authorities, the authorities may ultimately reject any marketing application that we file for a product candidate in the future, if any, or we might not obtain
regulatory clearance in a timely manner. Companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced or
late-stage clinical trials, even after obtaining promising earlier trial results or in preliminary findings or other comparable authorities for such clinical trials.
Further, even if favorable testing data is generated by the clinical trials of a drug candidate, the applicable regulatory authority may not accept or approve a
marketing application we file for the drug candidate or may require us to conduct additional clinical testing or perform post-marketing studies which would
cause us to incur additional costs.

Failure to obtain approval of the FDA, EMA or comparable foreign authorities of any of our drug candidates in a timely manner, if at all, will severely
undermine our business, financial condition and results of operation by reducing our potential marketable products and our ability to generate
corresponding product revenues.

We are subject to extensive governmental regulation including the requirements of the FDA and other comparable regulatory authorities before
our drug candidates may be marketed.

Both before and after marketing approval of our drug candidates, if at all, we, our drug candidates, our suppliers, our contract manufacturers and our
contract testing laboratories are subject to extensive regulation by the FDA and comparable foreign regulatory authorities. Failure to comply with
applicable requirements of the FDA or comparable foreign regulatory authorities could result in, among other things, any of the following actions:

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warning letters;
fines and other monetary penalties;
unanticipated expenditures;
delays in the FDA’s or other foreign regulatory authorities’ approving, or the refusal of any regulatory authority to approve, any drug
candidate;
product recall or seizure;
interruption of manufacturing or clinical trials;
operating restrictions;
injunctions; and
criminal prosecutions.

In addition to the approval requirements, other numerous and pervasive regulatory requirements apply, both before and after approval, to us, our drug
candidates, our suppliers, contract manufacturers, and contract testing laboratories. These include requirements related to:

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testing;
manufacturing;
quality control;
labeling;
advertising;
promotion;
distribution;
export;
reporting to the FDA certain adverse experiences associated with use of the drug candidate; and
obtaining additional approvals for certain modifications to the drug candidate or its labeling or claims.

We also are subject to inspection by the FDA and comparable foreign regulatory authorities, to determine our compliance with regulatory requirements, as
are our suppliers, contract manufacturers, and contract testing laboratories, and there can be no assurance that the FDA, or any other comparable foreign
regulatory authority, will not identify compliance issues that may disrupt production or distribution, or require substantial resources to correct. We may be
required to make modifications to our manufacturing operations in response to these inspections which may require significant resources and may have a
material adverse effect upon our business, results of operations and financial condition.

The approval process for any drug candidate may also be delayed by changes in government regulation, future legislation or administrative action or
changes in policy of the FDA and comparable foreign authorities that occur prior to or during their respective regulatory reviews of such drug candidate.
Delays in obtaining regulatory approvals with respect to any drug candidate may:

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delay commercialization of, and our ability to derive product revenues from, such drug candidate;
delay any regulatory-related milestone payments payable under outstanding collaboration agreements;
require us to perform costly procedures with respect to such drug candidate; or
otherwise diminish any competitive advantages that we may have with respect to such drug candidate.

Delays in the approval process for any drug candidate may have a material adverse effect upon our business, results of operations and financial condition.

Clinical trials are very expensive, time-consuming and difficult to design and implement and may result in unforeseen costs which may have a
material adverse effect on our business, results of operations and financial condition.

Human clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. The
clinical trial process is also time-consuming. Other than taliglucerase alfa, all of our other drug candidates, including pegunigalsidase alfa, are in the
clinical, preclinical or research stages. Our clinical program for pegunigalsidase alfa is in the middle of phase III, but generally, clinical programs take at
least several years to complete. Preliminary and initial results from a clinical trial do not necessarily predict final results, and failure can occur at any stage
of the trial. We may encounter problems that cause us to abandon or repeat preclinical studies or clinical trials. Failure or delay in the commencement or
completion of our clinical trials may be caused by several factors, including:

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slower than expected rates of patient recruitment, particularly with respect to trials of rare diseases such as Fabry disease;
determination of dosing issues;
unforeseen safety issues;
lack of effectiveness during clinical trials;
disagreement by applicable regulatory bodies over our trial protocols, the interpretation of data from preclinical studies or clinical trials or
conduct and control of clinical trials;
determination that the patient population participating in a clinical trial may not be sufficiently broad or representative to assess efficacy
and safety for our target population;

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inability to monitor patients adequately during or after treatment;
inability or unwillingness of medical investigators and institutional review boards to follow our clinical protocols; and
lack of sufficient funding to finance the clinical trials.

Any failure or delay in commencement or completion of any clinical trials of pegunigalsidase alfa or our other product candidates will have a material
adverse effect on our business, results of operations and financial condition. In addition, we or the FDA or other regulatory authorities may suspend any
clinical trial at any time if it appears that we are exposing participants in the trial to unacceptable safety or health risks or if the FDA or such other
regulatory authorities, as applicable, find deficiencies in our IND submissions or the conduct of the trial. Any suspension of a clinical trial may have a
material adverse effect on our business, results of operations and financial condition.

We may find it difficult to enroll patients in our clinical trials, which could cause significant delays in the completion of such trials or may cause us
to abandon one or more clinical trials.

Some of the diseases or disorders that our drug candidates are intended to treat are relatively rare and we expect only a subset of the patients with these
diseases to be eligible for our clinical trials. Our clinical trials generally mandate that a patient cannot be involved in another clinical trial for the same
indication. Therefore, subjects that participate in ongoing clinical trials for products that are competitive with our drug candidates are not available for our
clinical trials. An inability to enroll a sufficient number of patients for any of our clinical trials would result in significant delays or may require us to
abandon one or more clinical trials altogether, which will have a material adverse effect on our business, results of operations and financial condition.

If the results of our clinical trials do not support our claims relating to a drug candidate, or if serious side effects are identified, the completion of
development of such drug candidate may be significantly delayed or we may be forced to abandon development altogether, which will significantly
impair our ability to generate product revenues.

The results of our clinical trials with respect to any drug candidate might not support our claims of safety or efficacy, the effects of our drug candidates
may not be the desired effects or may include undesirable side effects or the drug candidates may have other unexpected characteristics. Data obtained
from tests are susceptible to varying interpretations which may delay, limit or prevent regulatory approval. The clinical trial process may fail to
demonstrate that our drug candidates are safe for humans and effective for indicated uses. In addition, our clinical trials, may involve specific and small
patient populations. Results of early clinical trials conducted on a small patient population may not be indicative of future results. Adverse or
inconclusive results may cause us to abandon a drug candidate and may delay development of other drug candidates. Any delay in, or termination of, our
clinical trials will delay the filing of NDAs and BLAs with the FDA, or other filings with other foreign regulatory authorities, and, ultimately,
significantly impair our ability to commercialize our drug candidates and generate product revenues which would have a material adverse effect on our
business, results of operations and financial condition.

Patients may discontinue their participation in our clinical trials which may negatively impact the results of these studies and extend the timeline
for completion of our development programs.

Patients enrolled in our clinical trials may discontinue their participation at any time during the study as a result of a number of factors, including
withdrawing their consent, experiencing adverse clinical events, which may or may not be judged related to our drug candidates under evaluation, or due to
planned or actual pregnancies. The discontinuation of patients in any one of our studies may delay the completion of the study or cause the results from the
study not to be positive or to not support a filing for regulatory approval of the applicable drug candidate, which would have a material adverse effect on
our business, results of operations and financial condition.

Because our clinical trials depend upon third-party researchers, the results of our clinical trials and such research activities are subject to delays
and other risks which are, to a certain extent, beyond our control, which could impair our clinical development programs and our competitive
position.

We depend upon independent investigators and collaborators, such as universities and medical institutions, to conduct our preclinical and clinical trials.
These collaborators are not our employees, and we cannot control the amount or timing of resources that they devote to our clinical development programs.
The investigators may not assign as great a priority to our clinical development programs or pursue them as diligently as we would if we were undertaking
such programs directly. If outside collaborators fail to devote sufficient time and resources to our clinical development programs, or if their performance is
substandard, the approval of anticipated NDAs, BLAs and other marketing applications, and our introduction of new drugs, if any, may be delayed which
could impair our clinical development programs and would have a material adverse effect on our business, results of operations and financial condition.
The collaborators may also have relationships with other commercial entities, some of whom may compete with us. If our collaborators also assist our
competitors, our competitive position could be harmed.

We have only limited experience in regulatory affairs, and some of our drug candidates may be based on new technologies. These factors may
affect our ability or the time we require to obtain necessary regulatory approvals.

We have only limited experience in filing and prosecuting the applications necessary to gain regulatory approvals for medical devices and drug candidates.
Moreover, some of the drug candidates that are likely to result from our development programs may be based on new technologies that have not been
extensively tested in humans. The regulatory requirements governing these types of drug candidates may be less well defined or more rigorous than for
conventional products. As a result, we may experience a longer regulatory process in connection with obtaining regulatory approvals of any products that
we develop, which may have a material adverse effect on our business, results of operations and financial condition.

Orphan drug designation may not ensure that we will enjoy market exclusivity in any jurisdiction. If any of our other competitors are able to
obtain orphan drug exclusivity for any products that are competitive with our products, we may be precluded from selling or obtaining approval
of our competing products by the applicable regulatory authorities for a significant period of time.

In the United States, the European Union and other countries, a drug may be designated as having orphan drug status, subject to certain conditions. There
can be no assurance that a drug candidate that receives orphan drug designation will receive orphan drug marketing exclusivity and more than one drug can
have orphan designation for the same indication. In addition, the orphan drug designation granted to pegunigalsidase alfa by the EMA does not affect Fabry
disease treatments that preexist the approval of pegunigalsidase alfa, if at all.

Foreign regulations regarding orphan drugs are similar to those in the United States but there are several differences. For example, the exclusivity period in
the European Union is generally 10 years. From time to time, we may apply to the FDA or any comparable foreign regulatory authority for orphan drug
designation for any one or more of our drug candidates. Other than pegunigalsidase alfa which was granted orphan drug designation by the EMA, none of
our drug candidates have been designated as an orphan drug and there is no guarantee that the FDA or any other regulatory authority will grant such
designation in the future. In addition, neither orphan drug designation nor orphan drug exclusivity prevents competitors from developing or marketing
different drugs for the relevant indication. Even if we obtain orphan drug exclusivity for one or more indications for one of our drug candidates, we may
not be able to maintain the exclusivity. For example, if a competitive product that is the same drug or biologic as one of our drug candidates is shown to be
clinically superior to the drug candidate, any orphan drug exclusivity granted to the drug candidate will not block the approval of the competitive product.

If any drug receives orphan drug exclusivity in any jurisdiction for the same indication of any of our drug candidates, we may be prevented from attaining a
similar designation with respect to our drug candidate or from marketing the drug candidate in the jurisdiction during the applicable exclusivity period,
which will have a material adverse effect on our business, results of operations and financial condition.

The fast track designation for pegunigalsidase alfa for the treatment of Fabry disease may not lead to a faster development or regulatory review or
approval process or increase the likelihood that pegunigalsidase alfa will receive regulatory approval for the treatment of Fabry disease.

The FDA has granted Fast Track designation to pegunigalsidase alfa for the treatment of Fabry disease. Fast Track designation does not increase the
likelihood that pegunigalsidase alfa will receive regulatory approval for the treatment of Fabry disease. Further, despite the designation, we may not
experience a faster development process, review or approval compared to applications considered for approval under conventional FDA procedures. In
addition, the FDA is entitled to withdraw the Fast Track designation of a drug candidate at any time. Any failure to realize the benefits of Fast Track
designation may have a material adverse effect on our business, results of operations and financial condition.

Risks Related to Our Business

We have a limited operating history which may limit the ability of investors to make an informed investment decision.

Taliglucerase alfa is our only commercial product. The successful commercialization of our other drug candidates will require us to perform a variety of
functions, including:

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continuing to perform preclinical development and clinical trials;
participating in regulatory approval processes;
formulating and manufacturing products; and
conducting sales and marketing activities.

Our operations have been limited to organizing and staffing our company, acquiring, developing and securing our proprietary technology and
undertaking, through third parties, preclinical trials and clinical trials of our principal drug candidates. To date, our phase III clinical trial of taliglucerase
alfa is the only phase III study we have completed. These operations provide a limited basis for investors to assess our ability to commercialize our drug
candidates and whether to invest in our company.

We currently depend heavily on the success of pegunigalsidase alfa. Any failure to commercialize pegunigalsidase alfa, or the experience of
significant delays in doing so, will have a material adverse effect on our business, results of operations and financial condition.

We are investing a significant portion of our efforts and financial resources in the development of pegunigalsidase alfa and our ability to generate
significant product revenues in the future, will depend heavily on the successful development and commercialization of pegunigalsidase alfa. The
successful commercialization of pegunigalsidase alfa will depend on several factors, including the following:

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successful completion of our ongoing studies of pegunigalsidase alfa;
Chiesi’s efforts under the Chiesi Agreement;
obtaining marketing approvals from the FDA, the EMA and other foreign regulatory authorities;
maintaining the cGMP compliance of our manufacturing facility or establishing manufacturing arrangements with third parties;
the successful audit of our facilities by the FDA and other foreign regulatory authorities;
the development of successful sales and marketing organizations for pegunigalsidase alfa;
the availability of reimbursement to patients from healthcare payors for pegunigalsidase alfa, if approved;
a continued acceptable safety and efficacy profile of pegunigalsidase alfa following approval; and
other risks described in these Risk Factors.

Any failure to commercialize pegunigalsidase alfa or the experience of significant delays in doing so will have a material adverse effect on our business,
results of operations and financial condition.

Any failure by us to supply drug substance to Pfizer may have a material adverse effect on our business, results of operations and financial
condition.

Under the Amended Pfizer Agreement, we have agreed, for the first 10-year period after the execution of the agreement, to sell drug substance to Pfizer for
the production of Elelyso, and Pfizer maintains the right to extend the supply period for up to two additional 30-month periods subject to certain terms and
conditions. As part of that obligation, we agreed to substantial financial penalties in case we fail to comply with the supply commitments, or are delayed in
doing so. The amounts of the penalties depend on when any such failure occurs and for how long it persists, if at all, and other considerations. Any failure
to comply with the supply commitments under the Amended Pfizer Agreement may have a material adverse effect on our business, results of operations
and financial condition.

Our strategy, in certain cases, is to enter into collaboration agreements with third parties to leverage our ProCellEx system to develop product
candidates. Failure to enter into such agreements, or non-compliance by us or our collaborators with such agreements, may have a material
adverse effect on our business, results of operations and financial condition.

Our strategy, in certain cases, is to enter into arrangements with pharmaceutical companies to leverage our ProCellEx system to develop additional
product candidates. Under these arrangements, we may grant to our partners rights to license and commercialize pharmaceutical products developed
under the applicable agreements, as we have done with Elelyso and pegunigalsidase alfa. Our partners may control key decisions relating to the
development of the products and we may depend on our partners’ expertise and dedication of sufficient resources to develop and commercialize our
product candidates. The rights of our partners limit our flexibility in considering alternatives for the commercialization of our product candidates. If we
or any of our current or future partners breach or terminate the agreements that make up such arrangements, our partners otherwise fail to conduct their
obligations under such arrangements in a timely manner, there is a dispute about their obligations or if either party terminates the applicable agreement
or elects not to continue the arrangement, we may not enjoy the benefits of the agreements or receive a sufficient amount of royalty or milestone
payments from them, if any, which may have a material adverse effect on our business, results of operations and financial condition.

If we are unable to develop and commercialize our product candidates, our business will be adversely affected.

A key element of our strategy is to develop and commercialize a portfolio of new products in addition to taliglucerase alfa. We seek to do so through our
internal research programs and strategic collaborations for the development of new products. Research programs to identify new product candidates require
substantial technical, financial and human resources, whether or not any product candidates are ultimately identified. Our research programs may initially
show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for many reasons, including the
following:

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a product candidate is not capable of being produced in commercial quantities at an acceptable cost, or at all;
a product candidate may not be accepted by patients, the medical community or third-party payors;
competitors may develop alternatives that render our product candidates obsolete;
the research methodology used may not be successful in identifying potential product candidates; or
a product candidate may on further study be shown to have harmful side effects or other characteristics that indicate it is unlikely to be
effective or otherwise does not meet applicable regulatory approval.

Any failure to develop or commercialize any of our other product candidates may have a material adverse effect on our business, results of operations and
financial condition.

Our ProCellEx protein expression system is based on our proprietary plant cell-based expression technology which has a limited history and any
material problems with the system, which may be unforeseen, may have a material adverse effect on our business, results of operations and
financial condition.

Our ProCellEx protein expression system is based on our proprietary plant cell-based expression technology. Although taliglucerase alfa and all of our
product candidates are produced through ProCellEx, the technology remains novel. Compared to mammalian cell-based protein expression systems for
which there is a wealth of data, there is not a significant amount of data generated regarding plant cell-based protein expression. Accordingly, plant cell-
based protein expression systems may be subject to unknown risks. In addition, the protein glycosilation pattern created by our protein expression system is
not identical to the natural human glycosilation pattern. Although we have over 10 years of experience with human treatment with taliglucerase alfa and
pegunigalsidase alfa in clinical and commercial settings without any sign of any effect, the longer term effect of the protein glycosilation pattern created by
our protein expression system on humans, if any, is still unknown. Lastly, as our protein expression system is a new technology, we cannot always rely on
existing equipment; rather, there is a need to design custom-made equipment and to generate specific growth media for the plant cells which may not be
available at favorable prices, if at all. Any material problems with the technology underlying our plant cell-based protein expression system may have a
material adverse effect on our business, results of operations and financial condition.

The manufacture of our products is an exacting and complex process, and if we or one of our materials suppliers encounter problems
manufacturing our products, it will have a material adverse effect on our business, results of operations and financial condition.

The FDA and foreign regulators require manufacturers to register manufacturing facilities. The FDA and foreign regulators also inspect these facilities
to confirm compliance with cGMP or similar requirements that the FDA or foreign regulators establish. We or our materials suppliers may face
manufacturing or quality control problems causing product production and shipment delays or a situation where we or the supplier may not be able to
maintain compliance with the FDA’s cGMP requirements, or those of foreign regulators, necessary to continue manufacturing our drug candidates. To
date, our current facility has passed audits by the FDA and a number of other regulatory authorities but remains subject to audit by other foreign
regulatory authorities. There can be no assurance that we will be able to comply with FDA or foreign regulatory manufacturing requirements for our
current facility or any facility we may establish in the future, and the failure to so comply will have a material adverse effect on our business, results of
operations and financial condition.

We rely on third parties for final processing of taliglucerase alfa, pegunigalsidase alfa and our product candidates, which exposes us to a number
of risks that may delay development, regulatory approval and commercialization of taliglucerase alfa and our other product candidates or result
in higher product costs.

We have no experience in the final filling and freeze drying steps of the drug manufacturing process. We rely on third parties in the United States and
Europe to perform fill and finish activities for taliglucerase alfa and pegunigalsidase alfa, and have engaged other parties for our other product candidates.
We may be unable to identify manufacturers and/or replacement manufacturers on acceptable terms or at all because the number of potential manufacturers
is limited and the FDA and other regulatory authorities, as applicable, must approve any manufacturer and/or replacement manufacturer, including us, and
we or any such third party manufacturer might be unable to formulate and manufacture our drug products in the volume and of the quality required to meet
our clinical and commercial needs. If we engage any contract manufacturers, such manufacturers may not perform as agreed or may not remain in the
contract manufacturing business for the time required to supply our clinical or commercial needs. In addition, contract manufacturers are subject to the
rules and regulations of the FDA and comparable foreign regulatory authorities and face the risk that any of those authorities may find that they are not in
compliance with applicable regulations. Each of these risks, if realized, could delay our clinical trials, the approval, if any, of our potential drug candidates
by the FDA and other regulatory authorities, or the commercialization of our drug candidates or could result in higher product costs or otherwise deprive us
of potential product revenues.

Developments by competitors may render our products or technologies obsolete or non-competitive which would have a material adverse effect on
our business, results of operations and financial condition.

We compete against fully integrated pharmaceutical companies and smaller companies that are collaborating with larger pharmaceutical companies,
academic institutions, government agencies and other public and private research organizations. Our drug candidates will have to compete with existing
therapies and therapies under development by our competitors. Our commercial opportunities may be reduced or eliminated if our competitors develop
and market products that are less expensive, more effective or safer than our drug products. Other companies have drug candidates in various stages of
preclinical or clinical development to treat diseases for which we are also seeking to develop drug products. Some of these potential competing drugs are
further advanced in development than our drug candidates and may be commercialized earlier. See Business – Competition.

Most of our competitors, either alone or together with their collaborative partners, operate larger research and development programs, staff and facilities
and have substantially greater financial resources than we do, as well as significantly greater experience in:

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developing drugs;
undertaking preclinical testing and human clinical trials;
obtaining marketing approvals from the FDA and other regulatory authorities;
formulating and manufacturing drugs; and
launching, marketing and selling drugs.

These organizations also compete with us to attract qualified personnel, acquisitions and joint ventures candidates and for other collaborations. Activities of
our competitors may impose unanticipated costs on our business or adversely affect the market for our drug products which would have a material adverse
effect on our business, results of operations and financial condition.

If we in-license drug candidates, we may delay or otherwise adversely affect the development of our existing drug candidates, which may
negatively impact our business, results of operations and financial condition.

In addition to our own internally developed drug candidates, we proactively seek opportunities to in-license and advance other drug candidates that are
strategic and have value-creating potential to take advantage of our development know-how and technology. In-licensing additional drug candidates may
significantly increase our capital requirements, and place a strain on the time of our existing personnel, which may delay or otherwise adversely affect
the development of our existing drug candidates or cause us to re-prioritize our drug pipeline if we do not have the necessary capital resources to
develop all of our drug candidates, which may have a material adverse impact on our business, results of operations and financial condition.

If we are unable to manage future growth successfully, there could be a material adverse impact on our business, results of operations and
financial condition.

To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our
facilities and continue to recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert
our management and business development resources. Any inability on the part of our management to manage growth could delay the execution of our
business plans or disrupt our operations. If we are unable to manage our growth effectively, we may not use our resources in an efficient manner, which
may delay the development of our drug candidates and materially and adversely impact our business, results of operations and financial condition.

If we acquire companies, products or technologies, we may face integration risks and costs associated with those acquisitions that could negatively
impact our business, results of operations and financial condition.

If we are presented with appropriate opportunities, we may acquire or make investments in complementary companies, products or technologies. If we
acquire companies or technologies, we will face risks, uncertainties and disruptions associated with the integration process, including difficulties in the
integration of the operations of an acquired company, integration of acquired technology with our products, diversion of our management’s attention
from other business concerns, the potential loss of key employees or customers of the acquired business and impairment charges if future acquisitions
are not as successful as we originally anticipate. In addition, our operating results may suffer because of acquisition-related costs or amortization
expenses or charges relating to acquired intangible assets. Any failure to successfully integrate other companies, products or technologies that we may
acquire may have a material adverse effect on our business and results of operations. Furthermore, we may have to incur debt or issue equity securities
to pay for any additional future acquisitions or investments, the issuance of which could be dilutive to our existing stockholders.

We depend upon key employees and consultants in a competitive market for skilled personnel. If we are unable to attract and retain key
personnel, it could adversely affect our ability to develop and market our products.

We are highly dependent upon the principal members of our management team, especially our President and Chief Executive Officer, Dror Bashan, as
well as the Chairman of our Board of Directors, Zeev Bronfeld, our other directors, our scientific advisory board members, consultants and collaborating
scientists. Many of these people have been involved with us for many years and have played integral roles in our progress, and we believe that they will
continue to provide value to us. A loss of any of these personnel may have a material adverse effect on aspects of our business, clinical development and
regulatory programs. We have employment agreements with Mr. Bashan and our other executive officers that may be terminated by us or the applicable
officer at any time with varying notice periods of 60 to 180 days. The loss of any of these persons’ services may adversely affect our ability to develop
and market our products and obtain necessary regulatory approvals. Further, we do not maintain key-man life insurance.

We also depend in part on the continued service of our key scientific personnel and our ability to identify, hire and retain additional personnel, including
marketing and sales staff. We experience intense competition for qualified personnel, and the existence of non-competition agreements between
prospective employees and their former employers may prevent us from hiring those individuals or subject us to suit from their former employers. While
we attempt to provide competitive compensation packages to attract and retain key personnel, many of our competitors are likely to have greater
resources and more experience than we have, making it difficult for us to compete successfully for key personnel.

Our collaborations with outside scientists and consultants may be subject to restriction and change.

We work with medical experts, biologists, chemists and other scientists at academic and other institutions, and consultants who assist us in our research,
development, regulatory and commercial efforts, including the members of our scientific advisory board. These scientists and consultants have provided,
and we expect that they will continue to provide, valuable advice regarding our programs. These scientists and consultants are not our employees, may
have other commitments that would limit their future availability to us and typically will not enter into non-compete agreements with us. If a conflict of
interest arises between their work for us and their work for another entity, we may lose their services. In addition, we will be unable to prevent them
from establishing competing businesses or developing competing products. For example, if a key scientist acting as a principal investigator in any of our
clinical trials identifies a potential product or compound that is more scientifically interesting to his or her professional or academic interests, his or her
availability to remain involved in our clinical trials could be restricted or eliminated, which may have a material adverse effect on our business, results
of operations and financial condition.

Under current U.S. and Israeli law, we may not be able to enforce employees’ covenants not to compete and therefore may be unable to prevent
our competitors from benefiting from the expertise of some of our former employees.

We have entered into non-competition agreements with substantially all of our employees. These agreements prohibit our employees, if they cease
working for us, from competing directly with us or working for our competitors for a limited period. Under current U.S. and Israeli law, we may be
unable to enforce these agreements against most of our employees and it may be difficult for us to restrict our competitors from gaining the expertise our
former employees gained while working for us. If we cannot enforce our employees’ non-compete agreements, we may be unable to prevent our
competitors from benefiting from the expertise of our former employees, which may have a material adverse effect on our business, results of operations
and financial condition.

Our internal computer systems, or those used by our third-party contractors or consultants, may fail or suffer security breaches.

Despite the implementation of security measures, our internal computer systems and those of our present and future contractors and consultants are
vulnerable to damage from computer viruses and unauthorized access. Although to our knowledge we have not experienced any material system failure or
security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development
programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our
regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on our third-party research institution
collaborators for research and development of our product candidates and other third parties for the manufacture of our product candidates and to conduct
clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business. To the extent that any
disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary
information, we could incur liability and the further development and commercialization of our product candidates could be delayed.

If product liability claims are brought against us, it may result in reduced demand for our products and product candidates or damages that
exceed our insurance coverage.

The clinical testing, marketing and use of our products and product candidates exposes us to product liability claims if the use or misuse of those
products or product candidates cause injury or disease, or results in adverse effects. Use of our products or product candidates, whether in clinical trials
or post approval, could result in product liability claims. We presently carry clinical trial liability insurance with coverages of up to $10.0 million per
occurrence and $10.0 million in the aggregate, an amount we consider reasonable and customary. However, this insurance coverage includes various
deductibles, limitations and exclusions from coverage, and in any event might not fully cover any potential claims. We may need to obtain additional
clinical trial liability coverage prior to initiating additional clinical trials. We expect to obtain product liability insurance coverage before
commercialization of our product candidates; however, such insurance is expensive and insurance companies may not issue this type of insurance when
we need it. We may not be able to obtain adequate insurance in the future at an acceptable cost. Any product liability claim, even one that was not in
excess of our insurance coverage or one that is meritless and/or unsuccessful, may adversely affect our cash available for other purposes, such as
research and development, which may have a material adverse effect on our business, results of operations and financial condition. Product liability
claims, even if without merit, may result in reduced demand for our products, if approved, or result in adverse market reactions, which would have a
material adverse effect on our business, results of operations and financial condition.

Reforms in the healthcare industry and the uncertainty associated with pharmaceutical pricing, reimbursement and related matters could
adversely affect the marketing, pricing and demand for our products, if approved.

Increasing healthcare expenditures have been the subject of considerable public attention in the United States. Both private and government entities are
seeking ways to reduce or contain healthcare costs. Numerous proposals that would result in changes in the U.S. healthcare system have been introduced
or proposed in the U.S. Congress and in some state legislatures within the United States, including reductions in the pricing of prescription products and
changes in the levels at which consumers and healthcare providers are reimbursed for purchases of pharmaceutical products. Legislation passed in recent
years has imposed certain changes to the way in which drugs, including our product candidates, are covered and reimbursed in the United States. For
example, federal legislation and regulations have implemented new reimbursement methodologies for certain drugs, created a voluntary prescription
drug benefit, Medicare Part D, and have imposed significant revisions to the Medicaid Drug Rebate Program. The PPACA imposes yet additional
changes to these programs. Legislation that reduces reimbursement for our product candidates could adversely impact how much or under what
circumstances healthcare providers will prescribe or administer our product candidates, if approved. This could materially and adversely impact our
business by reducing our ability to generate revenue, raise capital, obtain additional collaborators and market our products, if approved. In addition, we
believe the increasing emphasis on managed care in the United States has and will continue to put pressure on the price and usage of pharmaceutical
products, which may adversely impact product sales, upon approval, if at all.

Governments outside the United States tend to impose strict price controls and reimbursement approval policies, which may adversely affect our
prospects for generating revenue.

In some countries, particularly European Union member states, the pricing of prescription pharmaceuticals is subject to governmental control. In these
countries, pricing negotiations with governmental authorities can take considerable time (six to 12 months or longer) after the receipt of marketing approval
for a product. To obtain reimbursement or pricing approval in some countries with respect to any product candidate that achieves regulatory approval, we
may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. Any unavailability or
limitation on the reimbursement of our products upon approval, if at all, or the determination of unsatisfactory reimbursement prices, may have a material
adverse effect on our business, results of operations and financial condition. Further, if we achieve regulatory approval of any product, we must
successfully negotiate product pricing for such product in individual countries. As a result, the pricing of our product candidates, if approved, in different
countries may vary widely, thus creating the potential for third-party trade in our products in an attempt to exploit price differences between countries. This
third-party trade of our products could undermine our sales in markets with higher prices which could have a material adverse effect on our business,
results of operations and financial condition.

Our ability to utilize net operating loss carryforwards may be limited.

Our NOLs, as of December 31, 2019, are equal to approximately $213.1 million, of which approximately $29.0 million may be restricted under
Section 382 of the Internal Revenue Code, or the IRC. IRC Section 382 applies whenever a corporation with NOLs experiences an ownership change. As a
result of IRC Section 382, the taxable income for any post-change year that may be offset by a pre-change NOL may not exceed the fair market value of
the pre-change entity multiplied by the IRC long-term tax exempt rate. Significant judgment is required in determining any valuation allowance recorded
against deferred tax assets. In assessing the need for a valuation allowance, we considered all available evidence, including past operating results, the most
recent projections for taxable income and prudent and feasible tax planning strategies. We reassess our valuation allowance periodically and if future
evidence allows for a partial or full release of the valuation allowance, a tax benefit will be recorded accordingly. Any ownership change (including as a
result of conversion of our outstanding convertible notes into shares of our common stock), or any other limitation on our utilization of NOLs, could have a
material adverse effect on our business, results of operations and financial condition.

Our corporate structure may create U.S. federal income tax inefficiencies

Protalix Ltd. is our wholly-owned subsidiary and thus a controlled foreign corporation of our company for U.S. federal income tax purposes. This
organizational structure may create inefficiencies, as certain types of income and investments of Protalix Ltd. that otherwise would not be currently taxable
under general U.S. federal income tax principles may become taxable. These inefficiencies may require us to use more of our NOLs than we otherwise
might and may result in a tax liability without a corresponding distribution from our subsidiary which could have a material adverse effect on our business,
results of operations and financial condition.

We are a holding company with no operations of our own.

We are a holding company with no operations of our own. Accordingly, our ability to conduct our operations, service any debt that we may incur in the
future and pay dividends, if any, is dependent upon the earnings from the business conducted by Protalix Ltd. The distribution of those earnings or
advances or other distributions of funds by our subsidiary to us, as well as our receipt of such funds, are contingent upon the earnings of Protalix Ltd. and
are subject to various business considerations and U.S. and Israeli law. If Protalix Ltd. is unable to make sufficient distributions or advances to us, or if
there are limitations on our ability to receive such distributions or advances, we may not have the cash resources necessary to conduct our corporate
operations or service our debt which would have a material adverse effect on our business, results of operations and financial condition.

Risks Related to Our Financial Condition and Capital Requirements

Our management has raised substantial doubt about our ability to continue as a going concern.

Based on its internal assessment, our management has raised substantial doubt about our ability to continue as a going concern. As of December 31, 2019,
we had cash and cash equivalents of approximately $17.8 million. Our ability to continue as a going concern will depend on our ability to enter into a
refinancing or restructuring. We currently have outstanding $57.9 million aggregate principal amount of our 7.50% convertible promissory notes due
November 2021, or the 2021 Notes, which are secured with a perfected lien on all of our assets. In addition, we have an outstanding note payable to Pfizer
with a principal amount equal to $4.3 million due November 2020. Under the terms of the indenture governing the 2021 Notes, we are required to maintain
a minimum cash balance of at least $7.5 million. Management is in the process of evaluating refinancing and restructuring alternatives, including a
restructuring of our outstanding convertible notes, and related transactions. However, there is no certainty about our ability to obtain such funding. If we are
unable to secure additional financing in the future on acceptable terms, or at all, we may be unable to commence or complete planned preclinical and
clinical trials or obtain approval of our drug candidates from the FDA and other regulatory authorities. In addition, we may be forced to reduce or
discontinue product development or product licensing, reduce or forego sales and marketing efforts and other commercialization activities or forego
attractive business opportunities in order to improve our liquidity and to enable us to continue operations which would have a material adverse effect on our
business and results of operations.

We have received a Deficiency Letter from the NYSE American regarding our common stock.

On August 30, 2019, we announced that we received a deficiency letter from the NYSE American stating that we are not in compliance with the continued
listing standards as set forth in Section 1003(a)(i) – (iii) of the NYSE American Company Guide as we have reported a stockholders’ equity deficiency as
of June 30, 2019 and net losses in our five most recent fiscal years ended December 31, 2018, which may result in the delisting of our common stock from
the NYSE American. The letter has no immediate effect on the listing of our common stock on the NYSE American. Our common stock will trade on the
NYSE American while we regain compliance with the continued listing standards. Subsequently, we submitted a detailed plan of compliance advising the
NYSE American of the actions we have taken, or plan to take, that would bring our company into compliance with the continued listing standards within
18 months of receipt of the letter. A failure to regain compliance with applicable listing standards, or a failure to maintain compliance with other listing
standards, will adversely affect the liquidity of our common stock and could result in an event of default under the indenture governing our 2021 notes
which would have a material adverse effect on our business, results of operations and financial condition.

Servicing our debt and settling conversion requests may require a significant amount of cash, and we may not have sufficient cash flow from our
business to pay our debt. Furthermore, restrictive covenants governing our indebtedness may restrict our ability to raise additional capital.

Our ability to maintain minimum liquidity requirements of our 2021 Notes and to pay interest on, or to make any scheduled or otherwise required payment
of the principal of, and settle conversion requests on our outstanding convertible notes depends on our future performance, which is subject to economic,
financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to maintain
minimum liquidity amounts and to service our debt and make necessary expenditures. If we are unable to generate such cash flow, we may be required to
adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly
dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. If we raise additional debt, it
would increase our interest expense, leverage and operating and financial costs. In addition, the terms of the indentures governing our outstanding
convertible notes, which are secured by certain of our material assets, including all of our intellectual property, and the agreements governing future
indebtedness may restrict us from adopting any of these alternatives. We may be able to obtain amendments and waivers of such restrictions, subject to
such restrictions under the terms of the applicable indenture or any subsequent indebtedness. In the event of any such default, the holders of the
indebtedness could, among other things, elect to declare all amounts owed immediately due and payable, which could cause all or a large portion of our
available cash flow to be used to pay such amounts and thereby reduce the amount of cash available to pursue our business plans or force us into
bankruptcy or liquidation, or, with respect to our indebtedness that is secured, result in the foreclosure on the assets that secure the debt, which would force
us to relinquish rights to assets that we may believe are critical to our business. We may not be able to engage in any of these activities or engage in these
activities on desirable terms, which could result in a default on our debt obligations. Any default on our debt will have a material adverse effect on our
business, results of operations and financial condition.

Our significant level of indebtedness could adversely affect our business, results of operations and financial condition and prevent us from
fulfilling our obligations under our convertible notes and our other indebtedness.

Our outstanding convertible notes represent a significant amount of indebtedness with substantial debt service requirements. We may also incur additional
indebtedness to meet future financing needs. Our substantial indebtedness could have material adverse effects on our business, results of operations and
financial condition. For example, it could:

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make it more difficult for us to satisfy our financial obligations, including with respect to the convertible notes;
result in an event of default under our outstanding convertible notes if we fail to comply with the financial and other restrictive
covenants contained in agreements governing any future indebtedness, which event of default could result in all of our debt becoming
immediately due and payable;
increase our vulnerability to general adverse economic, industry and competitive conditions;
reduce the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate
purposes because we will be required to dedicate a substantial portion of our cash flow from operations to the payment of principal
and interest on our indebtedness;
limit our flexibility in planning for, or reacting to, and increasing our vulnerability to changes in our business, the industry in which
we operate and the general economy;
prevent us from raising funds necessary to purchase convertible notes surrendered to us by holders upon a fundamental change (as
described in the indenture governing the notes), which failure would result in an event of default with respect to the convertible notes;
place us at a competitive disadvantage compared to our competitors that have less indebtedness or are less highly leveraged and that,
therefore, may be able to take advantage of opportunities that our debt levels or leverage prevent us from exploiting; and
limit our ability to obtain additional financing.

Each of these factors may have a material and adverse effect on our business, results of operations and financial condition and our ability to meet our
payment obligations under the convertible notes and our other indebtedness. Our ability to make payments with respect to the convertible notes and to
satisfy any other debt obligations depends on our future operating performance and our ability to generate significant cash flow in the future, which will be
affected by prevailing economic conditions and financial, business, competitive, legislative and regulatory factors as well as other factors affecting our
company and industry, many of which are beyond our control.

We are required to comply with a number of covenants under the indenture governing our outstanding 2021 Notes that could hinder our growth.

The indenture governing our 2021 Notes contains a number of restrictive affirmative and negative covenants, which limit our ability to incur additional
debt; exceed certain limits; pay dividends or distributions; or merge, consolidate or dispose of substantially all of our assets, including all of our intellectual
property assets and other material assets securing such convertible notes. A breach of these covenants could result in default, and if such default is not
cured or waived, the holders of the indebtedness could, among other things, elect to declare all amounts owed immediately due and payable, which could
cause all or a large portion of our available cash flow to be used to pay such amounts and thereby reduce the amount of cash available to pursue our
business plans or force us into bankruptcy or liquidation, or, result in the foreclosure on the assets that secure the debt, including all of our intellectual
property assets, which would force us to relinquish rights to such assets that we may believe are critical to our business. We may not be able to engage in
any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. Any default on our debt will
have a material adverse effect on our business, results of operations and financial condition.

Any conversion of our outstanding convertible notes into common stock will dilute the ownership interest of our existing stockholders, including
holders who had previously converted their notes.

The conversion of some or all of our convertible notes into shares of our common stock will dilute the ownership interests of our existing stockholders.
Any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.
In addition, the existence of our outstanding convertible notes may encourage short selling by market participants because the conversion of convertible
notes could depress the market price of our common stock.

The fundamental change purchase feature of our outstanding convertible notes may delay or prevent an otherwise beneficial attempt to take over
our company.

The terms of our outstanding convertible notes require us to offer to purchase the notes for cash in the event of a fundamental change. A non-stock takeover
of our company may trigger the requirement that we purchase the notes. This feature may have the effect of delaying or preventing a takeover of our
company that would otherwise be beneficial to our stockholders.

We currently have no significant product revenues and need to raise additional capital to operate our business, which may not be available on
favorable terms, or at all, and which will have a dilutive effect on our stockholders.

To date, we have not generated significant revenues from product sales and only minimal revenues from research and development services and other
fees, other than the milestone and other payments we have received in connection with our agreements with Pfizer and Chiesi. For the years ended
December 31, 2019, 2018 and 2017, we had net losses from continuing operations of $18.3 million, $26.5 million and $83.4 million, respectively,
primarily as a result of expenses incurred through a combination of research and development activities and expenses supporting those activities, which
includes share-based compensation expense. Drug development and commercialization is very capital intensive. We fund all of our operations and
capital expenditures from the revenues we generate from licensing fees and grants, the net proceeds of equity and debt offerings and other sources. In
addition, changes may occur that could consume our existing capital at a faster rate than projected, including, among others, the cost and timing of
regulatory approvals, changes in the progress of our research and development efforts and the costs of protecting our intellectual property rights.

We will need to finance our future cash needs through corporate collaboration, licensing or similar arrangements, public or private equity offerings or debt
financings. If we are unable to secure additional financing in the future on acceptable terms, or at all, we may be unable to commence or complete planned
preclinical and clinical trials or obtain approval of our drug candidates from the FDA and other regulatory authorities. In addition, we may be forced to
reduce or discontinue product development or product licensing, reduce or forego sales and marketing efforts and other commercialization activities or
forego attractive business opportunities in order to improve our liquidity and to enable us to continue operations which would have a material adverse
effect on our business and results of operations. Furthermore, any additional source of financing will likely involve the issuance of our equity securities,
which will have a dilutive effect on our stockholders.

We are not currently profitable and delays in achieving profitability, if at all, will have a material adverse effect on our business and results of
operations and could negatively impact the value of our common stock.

We may incur losses for the foreseeable future. We expect to continue to incur significant operating expenditures, and we anticipate that our expenses
will increase in the foreseeable future as we:

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continue to undertake preclinical development and clinical trials for our current and new drug candidates;
seek regulatory approvals for our drug candidates; and
seek to in-license additional technologies.

We also may continue to experience negative cash flow for the foreseeable future as we fund our operating losses and capital expenditures. As a result, we
will need to generate significant revenues in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve
profitability in the foreseeable future, if at all. Delays in achieving profitability, or subsequent failures to maintain profitability, will have a material adverse
effect on our business and results of operations and could negatively impact the value of our common stock.

Risks Related to Investing in our Common Stock

The market price of our common stock may fluctuate significantly.

The market price of our common stock may fluctuate significantly in response to numerous factors, some of which are beyond our control, such as:

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the timing of anticipated marketing approvals for pegunigalsidase alfa;
our progress in regaining compliance with the continued listing standards of the NYSE American;
the progress and results of our ongoing studies regarding pegunigalsidase alfa and our other product candidates;
announcements regarding partnerships or collaborations by us or our competitors;
restatements of historical financial results and changes in financial forecasts;
purchases of BioManguinhos alfataliglicerase in Brazil;

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developments concerning intellectual property rights and regulatory approvals;
the announcement of new products or product enhancements by us or our competitors;
variations in our and our competitors’ results of operations;
changes in earnings estimates or recommendations by securities analysts;
developments in the biotechnology industry; and
general market conditions and other factors, including factors unrelated to our operating performance.

Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our
common stock. Price volatility of our common stock may be worse when the trading volume of our common stock is low. We have not paid, and do not
expect to pay, any cash dividends on our common stock as any earnings generated from future operations will be used to finance our operations. As a
result, investors will not realize any income from an investment in our common stock until and unless their shares are sold at a profit.

Future sales of our common stock could reduce our stock price.

If our stockholders sell substantial amounts of our common stock, including shares of our common stock issuable upon conversion of our outstanding
convertible notes, the market price of our common stock could decrease significantly. The perception in the public market that our existing stockholders
might sell shares of common stock could also depress the trading price of our common stock. Any such sales of our common stock in the public market
may affect the price of our common stock.

A substantial majority of our outstanding shares of our common stock are freely tradable without restriction or further registration under the federal
securities laws. In addition, we may sell additional shares of our common stock in the future to raise capital. A substantial number of shares of our common
stock are reserved for issuance upon the exercise of stock options and upon conversion of our outstanding convertible notes. At December 31, 2019, there
were outstanding options to purchase common stock issued covering approximately 1.1 million shares of our common stock with a weighted average
exercise price of approximately $13.34 per share. Also at December 31, 2019, there were approximately 0.7 million shares of common stock available for
future for issuance in connection with future grants of incentives under our amended 2006 stock incentive plan and approximately 7.3 million shares of
common stock reserved for issuance upon conversion of our outstanding convertible notes. The issuance and sale of substantial amounts of common stock,
or the perception that such issuances and sales may occur, could adversely affect the market price of our common stock and impair our ability to raise
capital through the sale of additional equity securities.

If securities analysts stop publishing research or reports about us or our business or if they downgrade our common stock, the market price of our
common stock could decline.

The market for our common stock relies in part on the research and reports that industry or financial analysts publish about us or our business. We do not
control these analysts. If any analyst who covers us downgrades our stock or lowers its future stock price targets or estimates of our operating results, the
market price for our common stock could decline rapidly. Furthermore, if any analyst ceases to cover us, we could lose visibility in the market, which in
turn could cause the market price of our common stock to decline.

Our common stock is listed to trade on more than one stock exchange, and this may result in price variations.

Our common stock is listed for trade on both the NYSE American and the TASE. Dual-listing may result in price variations between the exchanges due to a
number of factors. First, our common stock is traded in U.S. dollars on the NYSE American and in NIS on the TASE. In addition, the exchanges are open
for trade at different times of the day and on different days. For example, the TASE opens generally during Israeli business hours, Sunday through
Thursday, while the NYSE American opens generally during U.S. business hours, Monday through Friday. The two exchanges also have differing vacation
schedules. Differences in the trading schedules, as well as volatility in the exchange rate of the two currencies, among other factors, may result different
trading prices for our common stock on the two exchanges. Other external influences may have different effects on the trading price of our common stock
on the two exchanges.

Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses, divert management’s
attention from operating our business which could have a material adverse effect on our business.

The laws, rules, regulations and standards including the rules promulgated by the national securities exchanges, including the NYSE American, to which
we are subject are changed and/or amended from time to time. New or changed laws, rules, regulations and standards are subject to varying
interpretations in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is
provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated
by ongoing revisions to disclosure and governance practices. As a result, our efforts to comply with evolving laws, rules, regulations and standards are
likely to continue to result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating
activities to compliance activities. Members of our Board of Directors and our executive officers, could face an increased risk of personal liability in
connection with the performance of their duties. As a result, we may have difficulty attracting and retaining qualified directors and executive officers,
which could have a material adverse effect on our business. If our efforts to comply with new or changed laws, regulations and standards differ from the
activities intended by regulatory or governing bodies, we may incur additional expenses to comply with standards set by regulatory authorities or
governing bodies which would have a material adverse effect on our business, results of operations and financial condition.

The issuance of preferred stock or additional shares of common stock could adversely affect the rights of our stockholders.

Our Board of Directors is authorized to issue up to 100,000,000 shares of preferred stock without any further action on the part of our stockholders. Our
Board of Directors has the authority to fix and determine the voting rights, rights of redemption and other rights and preferences of preferred stock.
Currently, we have no shares of preferred stock outstanding.

Our Board of Directors may, at any time, authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets
upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of
the shares, together with a premium, before the redemption of our common stock, which may have a material adverse effect on the rights of the holders of
our common stock. In addition, our Board of Directors, without further stockholder approval, may, at any time, issue large blocks of preferred stock. In
addition, the ability of our Board of Directors to issue shares of preferred stock without any further action on the part of our stockholders may impede a
takeover of our company and may prevent a transaction that is favorable to our stockholders.

Risks Related to the Commercialization of Drug Products

There has been continued non-compliance with the terms and conditions of the Brazil Agreement.

We do not control and may not be able to effectively influence Fiocruz’s ability to distribute BioManguinhos alfataliglicerase in Brazil. Any failure by
Fiocruz to comply with the purchase requirements of the Brazil Agreement, or any other material breach by Fiocruz of the agreement, may have a material
adverse effect on our business, results of operations and financial condition.

We face the risk of lower than anticipated purchases of BioManguinhos alfataliglicerase by the Brazilian MoH. In addition, we may fail to supply the
intended amounts on time, if at all. We also cannot accurately predict the amount of revenues we will generate under the Brazil Agreement in future
periods, if any. Any failure by the Brazilian MoH to purchase BioManguinhos alfataliglicerase, by us to supply BioManguinhos alfataliglicerase for
purchase or by Fiocruz to distribute BioManguinhos alfataliglicerase in Brazil, or the experience of significant delays in any of the foregoing, may have a
material adverse effect on our business, results of operations and financial condition.

We have limited experience in selling, marketing or distributing products and limited internal capability to do so.

We currently have very limited sales, marketing or distribution capabilities and no experience in building a sales force and distribution capabilities. Under
our arrangements with Pfizer and Chiesi, we have outlicensed the marketing rights to Elelyso and pegunigalsidase alfa except that we retained the
marketing rights to BioManguinhos alfataliglicerase in Brazil. We have not licensed the marketing or commercialization rights to any of our other product
candidates to any party. The commercialization of a drug product requires that we commit significant financial and managerial resources to develop a
marketing and sales force with technical expertise and with supporting distribution capabilities. Factors that may inhibit our efforts to commercialize our
products directly and without strategic partners include:

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the inability to recruit and retain adequate numbers of effective sales and marketing personnel;
the inability of sales personnel to obtain access to an adequate numbers of physicians or to pursuance them to prescribe our products;
the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to
companies with more extensive product lines; and
unforeseen costs and expenses associated with creating and sustaining an independent sales and marketing organization.

We may not be successful in recruiting or retaining the sales and marketing personnel necessary to sell BioManguinhos alfataliglicerase or any of our
products upon approval, if at all, which would have a material adverse effect on our business, results of operations and financial condition.

We may enter into distribution arrangements and marketing alliances for certain products and any failure to successfully identify and implement
these arrangements on favorable terms, if at all, may impair our ability to commercialize our product candidates.

We may need to establish a sales force to market one or more of our product candidates, if approved. We do not anticipate having the resources in the
foreseeable future to develop global sales and marketing capabilities for all of the products we are developing. We may elect to pursue arrangements
regarding the sales and marketing and distribution of one or more of our product candidates, and our future revenues may depend, in part, on our ability
to enter into and maintain arrangements with other companies having sales, marketing and distribution capabilities and the ability of such companies to
successfully market and sell any such products. Any failure to enter into such arrangements and marketing alliances on favorable terms, if at all, could
delay or impair our ability to commercialize our product candidates and could increase our costs of commercialization. Any use of distribution
arrangements and marketing alliances to commercialize our product candidates will subject us to a number of risks, including the following:

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we may be required to relinquish important rights to our products or product candidates;
we may not be able to control the amount and timing of resources that our distributors or collaborators may devote to the
commercialization of our product candidates;
our distributors or collaborators may experience financial difficulties;
our distributors or collaborators may not devote sufficient time to the marketing and sales of our products; and
business combinations or significant changes in a collaborator’s business strategy may adversely affect a collaborator’s willingness or
ability to complete its obligations under any arrangement.

We may need to enter into additional co-promotion arrangements with third parties where our own sales force is neither well situated nor large enough to
achieve maximum penetration in the market. We may not be successful in entering into any co-promotion arrangements, and the terms of any co-promotion
arrangements we enter into may not be favorable to us.

If physicians, patients, third party payors and others in the medical community do not accept and use taliglucerase alfa, or any of our other
product candidates, if approved, our ability to generate revenue from product sales will be materially impaired.

Physicians and patients, and other healthcare providers, may not accept and use any of our products or any product candidates, if approved, for
marketing. Future acceptance and use of any of our products or any product candidates, if approved, will depend upon a number of factors including:

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perceptions by physicians, patients, third party payors and others in the medical community about the safety and effectiveness of
taliglucerase alfa or our other drug candidates;
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
the prevalence and severity of any side effects, including any limitations or warnings contained in our products’ approved labeling;
pharmacological benefits of taliglucerase alfa or our other drug candidates relative to competing products and products under development;
the efficacy and potential advantages relative to competing products and products under development;
relative convenience and ease of administration;
effectiveness of education, marketing and distribution efforts by us and our licensees and distributors, if any;
publicity concerning taliglucerase alfa or our other drug candidates or competing products and treatments;
coverage and reimbursement of our products by third party payors; and
the price for our products and competing products.

A lack of market acceptance of BioManguinhos alfataliglicerase in Brazil, or globally for any of our other products candidates, if approved, would have
a material adverse effect on our business, results of operations and financial condition.

If the market opportunities for other product candidates, and for BioManguinhos alfataliglicerase in Brazil, are smaller than we believe they are,
our revenues may be adversely affected and our business may suffer.

To date, our development efforts have focused mainly on relatively rare disorders with small patient populations, in particular Gaucher disease and
Fabry disease. Currently, most reported estimates of the prevalence of these diseases are based on studies of small subsets of the population of specific
geographic areas, which are then extrapolated to estimate the prevalence of the diseases in the broader world population. As new studies are performed,
the estimated prevalence of these diseases may change. There can be no assurance that the prevalence of Gaucher disease or Fabry disease in the study
populations, particularly in these newer studies, accurately reflect the prevalence of these diseases in the broader world population. If the market
opportunities for our current product candidates are smaller than we believe they are, our revenues may be adversely affected and our business may
suffer.

Coverage and reimbursement may not be available for one or more of our product candidates, if approved, in all territories which could diminish
our sales or affect our ability to sell any such products profitably.

Market acceptance and sales of any one or more of our product candidates, if approved, will depend on coverage and reimbursement policies in the
countries in which they are approved for sale. Government authorities and third-party payors, such as private health insurers and health maintenance
organizations, decide which drugs they will pay for and establish reimbursement levels. Obtaining reimbursement approval for an approved product
from governments and other third party payors is a time consuming and costly process that requires our collaborators or us, as the case may be, to
provide supporting scientific, clinical and cost-effectiveness data for the use of our products, if and when approved, to every payor. We may not be able
to provide data sufficient to gain acceptance with respect to coverage and reimbursement or we might need to conduct post-marketing studies in order to
demonstrate the cost-effectiveness of approved products, if any, to such payors’ satisfaction. Such studies might require our collaborators or us to
commit a significant amount of management time and financial and other resources. Even if a payor determines that an approved product is eligible for
reimbursement, the payor may impose coverage limitations that preclude payment for some uses that are approved by the FDA or other regulatory
authorities. In addition, full reimbursement may not be available for high priced products. Moreover, eligibility for coverage does not imply that any
approved product will be reimbursed in all cases or at a rate that allows us to make a profit or even cover our costs. Limited reimbursement amounts
may reduce the demand for, or the price of, our product candidates. If coverage and reimbursement are not available or are available only to limited
levels, the sales of our products, if approved, may be diminished or we may not be able to sell such products profitably.

We and our collaborating partners may be subject, directly or indirectly, to federal and state healthcare fraud and abuse and false claims laws and
regulations. If we or our collaborating partners are unable to comply, or have not fully complied, with such laws, we could face substantial
penalties.

All marketing activities associated with drug products that are approved for sale in the United States, if any, will be, directly or indirectly through our
customers, subject to numerous federal and state laws governing the marketing and promotion of pharmaceutical products in the United States, including,
without limitation, the federal Anti-Kickback Law, the federal False Claims Act and HIPAA. These laws may adversely impact, among other things, our
proposed sales, marketing and education programs.

The federal Anti-Kickback Law prohibits persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or
indirectly, to induce either the referral of an individual, or the furnishing, recommending, or arranging for a good or service, for which payment may be
made under a federal healthcare program, such as the Medicare and Medicaid programs. The term “remuneration” has been broadly interpreted to include
anything of value, including for example, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of co-
payments and deductibles, ownership interests and providing anything at less than its fair market value. Despite a series of narrow safe harbors, the federal
Anti-Kickback Law prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry. Penalties for violations of
the federal Anti-Kickback Law include criminal penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid
and other state or federal healthcare programs. Many states have also adopted laws similar to the federal Anti-Kickback Law, some of which apply to the
referral of patients for healthcare items or services reimbursed by any source, not only the Medicare and Medicaid programs, and do not contain identical
safe harbors.

The federal False Claims Act imposes liability on any person who, among other things, knowingly presents, or causes to be presented, a false or fraudulent
claim for payment by a federal healthcare program. In addition, various states have enacted false claims laws analogous to the False Claims Act. Many of
these state laws apply where a claim is submitted to any third-party payer and not merely a federal healthcare program. Violations of the federal False
Claims Act and the analogous state laws may result in substantial financial penalties, some as much as three times the actual damages sustained by the
government.

HIPAA created several new federal crimes, including health care fraud, and false statements relating to health care matters. The health care fraud statute
prohibits knowingly and willfully executing a scheme to defraud any health care benefit program, including private third-party payers. The false statements
statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent
statement in connection with the delivery of or payment for health care benefits, items or services.

We are unable to predict whether we could be subject to actions under any of these or other fraud and abuse laws, or the impact of such actions. Moreover,
to the extent that taliglucerase alfa or any of our product candidates, if approved for marketing, will be sold in a foreign country, we and our future
collaborators may be subject to similar foreign laws and regulations. If we or any of our future collaborators are found to be in violation of any of the laws
described above and other applicable state and federal fraud and abuse laws, we may be subject to penalties, including civil and criminal penalties,
damages, fines, exclusion from government healthcare reimbursement programs and the curtailment or restructuring or our operations, any of which could
have a material adverse effect on our business, results of operations and financial condition.

Risks Related to Intellectual Property Matters

The intellectual property and assets owned by our subsidiaries are subject to security agreements that secure our payment and other obligations
under our 2021 Notes, and our subsidiaries have guaranteed all of those obligations.

In connection with the issuance of our 2021 Notes, we entered into security agreements pursuant to which our subsidiaries provided first priority security
interests in all of their assets, which consist of all of our intellectual property and other material assets. The security agreements secure certain payment,
indemnification and other obligations under the 2021 Notes. If we were to default on certain of our obligations, or in certain other circumstances generally
related to a bankruptcy or insolvency, holders of our outstanding 2021 Notes could seek to foreclose on the collateral under the security agreements to
obtain satisfaction our obligations, and our business could be materially and adversely impacted, which would in turn have a material adverse effect on our
results of operations and financial condition.

Furthermore, in connection with the issuance of the 2021 Notes, our subsidiaries guaranteed all of our obligations under the indenture governing such
convertible notes. If we were to default on our obligations under the indenture, the holders could require our subsidiaries to satisfy all of those obligations
under the guarantees.

If we fail to adequately protect or enforce our intellectual property rights or secure rights to third party patents, the value of our intellectual
property rights would diminish and our business, competitive position and results of operations would suffer.

As of December 31, 2019, we had 44 pending patent applications of which three are joint pending patent applications with a third party and one is an-in
licensed application. However, the filing of a patent application does not mean that we will be issued a patent, or that any patent eventually issued will be
as broad as requested in the patent application or sufficient to protect our technology. Any modification required to a current patent application may delay
the approval of such patent application which would have a material adverse effect on our business, results of operations and financial condition. In
addition, there are a number of factors that could cause our patents, if granted, to become invalid or unenforceable or that could cause our patent
applications to not be granted, including known or unknown prior art, deficiencies in the patent application or the lack of originality of the technology. Our
competitive position and future revenues will depend in part on our ability and the ability of our licensors and collaborators to obtain and maintain patent
protection for our products, methods, processes and other technologies, to preserve our trade secrets, to prevent third parties from infringing on our
proprietary rights and to operate without infringing the proprietary rights of third parties. We have filed U.S. and international patent applications for
process patents, as well as composition of matter patents, for taliglucerase alfa and our product candidates. However, we cannot predict:

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the degree and range of protection any patents will afford us against competitors and those who infringe upon our patents, including whether
third parties will find ways to invalidate or otherwise circumvent our licensed patents;
if and when patents will issue;
whether or not others will obtain patents claiming aspects similar to those covered by our licensed patents and patent applications; or
whether we will need to initiate litigation or administrative proceedings, which may be costly, whether we win or lose.

As of December 31, 2019, we held, or had license rights to, 88 patents. If patent rights covering our products or technologies are not sufficiently broad,
they may not provide us with sufficient proprietary protection or competitive advantages against competitors with similar products and technologies.
Furthermore, if the USPTO or foreign patent offices issue patents to us or our licensors, others may challenge the patents or circumvent the patents, or the
patent office or the courts may invalidate the patents. Thus, any patents we own or license from or to third parties may not provide any protection against
our competitors and those who infringe upon our patents.

Furthermore, the life of our patents is limited. The patents we hold, and the patents that may be issued in the future based on patent applications from the
patent families, relating to our ProCellEx protein expression system are expected to expire by 2025.

We rely on confidentiality agreements that could be breached and may be difficult to enforce which could have a material adverse effect on our
business and competitive position.

Our policy is to enter agreements relating to the non-disclosure of confidential information with third parties, including our contractors, consultants,
advisors and research collaborators, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas,
developments, discoveries and inventions of our employees and consultants while we employ them. However, these agreements can be difficult and
costly to enforce. Moreover, to the extent that our contractors, consultants, advisors and research collaborators apply or independently develop
intellectual property in connection with any of our projects, disputes may arise as to the proprietary rights to the intellectual property. If a dispute arises,
a court may determine that the right belongs to a third party, and enforcement of our rights can be costly and unpredictable. In addition, we rely on trade
secrets and proprietary know-how that we seek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors
and others. Despite the protective measures we employ, we still face the risk that:

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these agreements may be breached;
these agreements may not provide adequate remedies for the applicable type of breach; or
our trade secrets or proprietary know-how will otherwise become known.

Any breach of our confidentiality agreements or our failure to effectively enforce such agreements may have a material adverse effect on our business and
competitive position.

If we infringe the rights of third parties we could be prevented from selling products, forced to pay damages and required to defend against
litigation which could result in substantial costs and may have a material adverse effect on our business, results of operations and financial
condition.

We have not received to date any claims of infringement by any third parties. However, as our drug candidates progress into clinical trials and
commercialization, if at all, our public profile and that of our drug candidates may be raised and generate such claims. Defending against such claims,
and occurrence of a judgment adverse to us, could result in unanticipated costs and may have a material adverse effect on our business and competitive
position. If our products, methods, processes and other technologies infringe the proprietary rights of other parties, we may incur substantial costs and
we may have to:

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obtain licenses, which may not be available on commercially reasonable terms, if at all;
redesign our products or processes to avoid infringement;
stop using the subject matter claimed in the patents held by others, which could cause us to lose the use of one or more of our drug
candidates;
defend litigation or administrative proceedings that may be costly whether we win or lose, and which could result in a substantial
diversion of management resources; or
pay damages.

Any costs incurred in connection with such events or the inability to sell our products may have a material adverse effect on our business, results of
operations and financial condition.

If we cannot meet requirements under our license agreements, we could lose the rights to our products, which could have a material adverse effect
on our business.

We depend on licensing agreements with third parties to maintain the intellectual property rights to certain of our product candidates. Our license
agreements require us to make payments and satisfy performance obligations in order to maintain our rights under these agreements. All of these
agreements last either throughout the life of the patents that are the subject of the agreements, or with respect to other licensed technology, for a number
of years after the first commercial sale of the relevant product.

In addition, we are responsible for the cost of filing and prosecuting certain patent applications and maintaining certain issued patents licensed to us. If
we do not meet our obligations under our license agreements in a timely manner, we could lose the rights to our proprietary technology which could
have a material adverse effect on our business, results of operations and financial condition.

Risks Relating to Our Operations in Israel

Potential political, economic and military instability in the State of Israel, where the majority of our senior management and our research and
development facilities are located, may adversely affect our results of operations.

Our executive office and operations are located in the State of Israel. Accordingly, political, economic and military conditions in Israel directly affect our
business. Since the State of Israel was established in 1948, a number of armed conflicts have occurred between Israel and its Arab neighbors. Any
hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners, or a significant downturn in the
economic or financial condition of Israel, could affect adversely our operations and product development. Although Israel has entered into various
agreements with Egypt, Jordan and the Palestinian Authority, there have been times since October 2000 when Israel has experienced an increase in
unrest and terrorist activity. The establishment in 2006 of a government in the Gaza Strip by representatives of the Hamas militant group has created
additional unrest and uncertainty in the region. Starting in December 2008, for approximately three weeks, Israel engaged in an armed conflict with
Hamas in the Gaza Strip. Armed conflicts have taken place between Israel and Hamas in the Gaza Strip in 2008, 2012 and 2014. Our facilities in
northern Israel are in range of rockets that were fired from Lebanon into Israel during a 2006 war with the Hizbollah in Lebanon, and suffered minimal
damages during one of the rocket attacks. Our insurance policies do not cover us for the damages incurred in connection with these conflicts or for any
resulting disruption in our operations. The Israeli government, as a matter of law, provides coverage for the reinstatement value of direct damages that
are caused by terrorist attacks or acts of war; however, the government may cease providing such coverage or the coverage might not be enough to cover
potential damages. If our facilities are damaged as a result of hostile action, our operations may be materially adversely affected.

In addition to the foregoing, since the end of 2010, numerous acts of protest and civil unrest have taken place in several countries in the Middle East and
North Africa, many of which involved significant violence. Civil unrest in Egypt, which borders Israel, has resulted in significant changes to the country’s
government. There is currently a civil war in Syria, also bordering Israel, and Israel has been hit by rockets and mortars originating from Syria. The
ultimate effect of these developments on the political and security situation in the Middle East and on Israel’s position within the region is not clear at this
time.

Our operations may be disrupted by the obligations of our personnel to perform military service which could have a material adverse effect on
our business.

Many of our male employees in Israel, including members of senior management, are obligated to perform up to one month (in some cases more) of
annual military reserve duty until they reach the age of 45 and, in the event of a military conflict, could be called to active duty. Our operations could be
disrupted by the absence of a significant number of our employees related to military service or the absence for extended periods of military service of
one or more of our key employees. A disruption could have a material adverse effect on our business, results of operations and financial condition.

Because a certain portion of our expenses is incurred in New Israeli Shekels, our results of operations may be seriously harmed by currency
fluctuations and inflation.

We report our financial statements in U.S. dollars, our functional currency. Although most of our expenses are incurred in U.S. dollars, we pay a portion
of our expenses in New Israeli Shekels, or NIS, and as a result, we are exposed to risk to the extent that the inflation rate in Israel exceeds the rate of
devaluation of the NIS in relation to the U.S. dollar or if the timing of these devaluations lags behind inflation in Israel. In that event, the U.S. dollar cost
of our operations in Israel will increase and our U.S. dollar-measured results of operations will be adversely affected. To the extent that the value of the
NIS increases against the dollar, our expenses on a dollar cost basis increase. Our operations also could be adversely affected if we are unable to guard
against currency fluctuations in the future. To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging
transactions to decrease the risk of financial exposure from fluctuations in the exchange rate of the U.S. dollar against the NIS. These measures,
however, may not adequately protect us from material adverse effects.

The tax benefits available to us require that we meet several conditions and may be terminated or reduced in the future, which would increase our
taxes.

We are able to take advantage of tax exemptions and reductions resulting from the “Approved Enterprise” status of our facilities in Israel. To remain
eligible for these tax benefits, we must continue to meet certain conditions, including making specified investments in property and equipment, and
financing at least 30% of such investments with share capital. If we fail to meet these conditions in the future, the tax benefits would be canceled and we
may be required to refund any tax benefits we already have enjoyed. These tax benefits are subject to investment policy by the Investment Center and
may not be continued in the future at their current levels or at any level. In recent years the Israeli government has reduced the benefits available and has
indicated that it may further reduce or eliminate some of these benefits in the future. The termination or reduction of these tax benefits or our inability to
qualify for additional “Approved Enterprise” approvals may increase our tax expenses in the future, which would reduce our expected profits and
adversely affect our business and results of operations. Additionally, if we increase our activities outside of Israel, for example, by future acquisitions,
such increased activities generally may not be eligible for inclusion in Israeli tax benefit programs.

The Israeli government grants we have received for certain research and development expenditures restrict our ability to manufacture products
and transfer technologies outside of Israel and require us to satisfy specified conditions. If we fail to satisfy these conditions, we may be required to
refund grants previously received together with interest and penalties which could have a material adverse effect on our business and results of
operations.

Our research and development efforts have been financed, in part, through grants that we have received from NATI. We, therefore, must comply with the
requirements of the Research Law. Under the Research Law we are prohibited from manufacturing products developed using these grants outside of the
State of Israel without special approvals, although the Research Law does enable companies to seek prior approval for conducting manufacturing
activities outside of Israel without being subject to increased royalties. We may not receive the required approvals for any proposed transfer of
manufacturing activities. Even if we do receive approval to manufacture products developed with government grants outside of Israel, we may be
required to pay an increased total amount of royalties (possibly up to 300% of the grant amounts plus interest), depending on the manufacturing volume
that is performed outside of Israel, as well as at a possibly increased royalty rate. This restriction may impair our ability to outsource manufacturing or
engage in similar arrangements for those products or technologies.

These restrictions may impair our ability to sell our technology assets or to outsource manufacturing outside of Israel. The restrictions will continue to
apply for a certain period of time even after we have repaid the full amount of royalties payable for the grants. For the years ended December 31, 2017,
2018 and 2019, we recorded grants totaling $3.3 million, $2.2 million and $0.1 million from NATI, respectively. The grants represent 10.4%, 6.2% and
0.2%, respectively, of our gross research and development expenditures for the years ended December 31, 2017, 2018 and 2019. If we fail to satisfy the
conditions of the Research Law, we may be required to refund certain grants previously received together with interest and penalties, and may become
subject to criminal charges, any of which could have a material adverse effect on our business, results of operations and financial condition.

Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal
securities laws against us, our executive officers and most of our directors or asserting U.S. securities laws claims in Israel.

Most of our directors and all of our executive officers are residents of Israel, and accordingly, most of their assets and our assets are located outside the
United States. Service of process upon our non-U.S. resident directors and officers and enforcement of judgments obtained in the United States against
us, some of our directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel
that investors may find it difficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the
civil liability provisions of U.S. federal securities laws against us, our officers and our directors. Israeli courts may refuse to hear a claim based on a
violation of U.S. securities laws against us or our officers and directors because Israel is not the most appropriate forum to bring such a claim. In
addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found
to be applicable, the content of applicable U.S. law must be proved as a fact which can be a time-consuming and costly process. Certain matters of
procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above.

Israeli courts might not enforce judgments rendered outside Israel which may make it difficult to collect on judgments rendered against us. Subject to
certain time limitations, an Israeli court may declare a foreign civil judgment enforceable only if it finds that:

·
·
·

the judgment was rendered by a court which was, according to the laws of the state of the court, competent to render the judgment;
the judgment may no longer be appealed;
the obligation imposed by the judgment is enforceable according to the rules relating to the enforceability of judgments in Israel and
the substance of the judgment is not contrary to public policy; and
the judgment is executory in the state in which it was given.

Even if these conditions are satisfied, an Israeli court will not enforce a foreign judgment if it was given in a state whose laws do not provide for the
enforcement of judgments of Israeli courts (subject to exceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the
State of Israel. An Israeli court also will not declare a foreign judgment enforceable if:

·
·
·
·
·

the judgment was obtained by fraud;
there is a finding of lack of due process;
the judgment was rendered by a court not competent to render it according to the laws of private international law in Israel;
the judgment is at variance with another judgment that was given in the same matter between the same parties and that is still valid; or
at the time the action was brought in the foreign court, a suit in the same matter and between the same parties was pending before a
court or tribunal in Israel.

Item 1B.

Unresolved Staff Comments

None.

Item 2.

Properties

Our headquarters, including manufacturing facility, executive offices and others, are located in Carmiel, Israel. The facilities currently contain
approximately 12,900 sq/ft of manufacturing space and 3,800 sq/ft for a pilot plant, 8,900 sq/ft for offsite warehouse space and approximately 40,000 sq/ft
of laboratories, front warehouse and office space, and are leased at a rate of approximately $66,000 per month. In addition, we are entitled to use an
additional 12,900 sq/ft in the same facility, which we intend to utilize in connection with an anticipated expansion of our manufacturing facilities. Our
facilities are equipped with the requisite laboratory services required to conduct our business, and we believe that the existing facilities are adequate to meet
our needs for the foreseeable future. Our original lease for the facility was in effect until 2016, at which time we extended the term until 2021. We retain
two additional options to extend the term for a five-year period, for an aggregate of 10 additional years. Upon the exercise of each remaining option to
extend the term of the lease, if any, the then current base rent will be increased by 10%.

Item 3.

Legal Proceedings

We are not involved in any material legal proceedings.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the NYSE American under the symbol “PLX.” Our common stock is also listed on the TASE under the symbol “PLX.” As
of March 1, 2020, there were approximately 72 holders of record of our common stock. A substantially greater number of holders of our common stock are
“street name” or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions.

PART II

Item 6.

Selected Financial Data

The selected consolidated financial data below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. The
selected consolidated statements of operations data for the years ended December 31, 2019, 2018 and 2017 and the selected consolidated balance sheet data
as of December 31, 2019 and 2018, are derived from the audited consolidated financial statements included elsewhere in this Annual Report. The statement
of operations data for the years ended December 31, 2016 and 2015 and the balance sheet data as of December 31, 2017, 2016 and 2015 are derived from
audited financial statements not included in this Annual Report. The historical results presented below are not necessarily indicative of future results.
During 2019, we adopted Accounting Standard Codification topic 842 (Leases) on a modified retrospective basis. Consequently, financial information was
not updated and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019.

2015

2016

Year Ended December 31,
2017
(in thousands, except per share amounts)

2018

2019

Consolidated Statement of Operations
Data:
Revenues from selling goods
Revenues from license and R&D services
Cost of goods sold
Research and development expenses, net
Selling, general and administrative expenses
Financial income (expenses), net
Loss from continuing operations
(Loss) income from discontinued operations
Net (loss) income for the year
Net (loss) income per share of common stock,

basic and diluted:

Loss from continuing operations

(Loss) income from discontinued operations
Net (loss) income per share of common stock
Weighted average number of shares of

common stock used in computing net loss
per share of common stock

Consolidated Balance Sheet Data:
Cash and cash equivalents
All other assets
Total assets
Current liabilities
Long term convertible notes
Total liabilities
Total stockholders’ equity (capital deficiency)

4,364

9,199 $

730
20,025
7,279
(3,612)
27,282
85,319
58,037

(2.87)
8.99
6.12

8,398
24,608
9,356
3,987
29,176 $
(189)
(29,365)

(2.90) $
(0.00)
(2.90)

19,242 $
1,836
15,231
28,834
11,530
(48,923)
83,440 $

8,978 $
25,262
9,302
33,330
10,916
(7,149)
26,457 $

15,866
38,827
10,895
44,616
9,899
(7,559)
18,276

(83,440)

(26,457)

(18,276)

(6.37) $

(1.80) $

(6.37)

(1.80)

(1.23)

9,492,239

10,138,770

13,108,596

14,713,518

14,838,213

76,374
20,879
97,253
11,235
67,796
86,380
10,873

63,281 $
18,966
82,247
66,212
19,343
92,204
(9,957)

51,163 $
21,051
72,214
22,752
46,267
101,671
(29,457)

37,808 $
23,323
61,131
25,353
47,966
114,012
(52,881)

17,792
27,600
45,392
40,175
50,957
115,714
(70,322)

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial
statements and the related notes included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and
analysis, particularly with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks
and uncertainties. You should read “Risk Factors” in Item 1A of this Annual Report on Form 10-K for a discussion of important factors that could cause
actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and
analysis.

Overview

We are a biopharmaceutical company focused on the development and commercialization of recombinant therapeutic proteins primarily based on our
proprietary ProCellEx® protein expression system. We developed our first commercial drug product, Elelyso®, using our ProCellEx system and we are
now focused on utilizing the system to develop a pipeline of proprietary, clinically superior versions of complex recombinant therapeutic proteins that
primarily target large, established pharmaceutical markets and that in most cases rely upon known biological mechanisms of action. With our experience to
date, we believe ProCellEx will enable us to develop additional proprietary recombinant proteins that are therapeutically superior to existing recombinant
proteins currently marketed for the same indications, including applying the unique properties of our ProCellEx system for the oral delivery of therapeutic
proteins.

On March 12, 2020, we entered into the Purchase Agreements with the Purchasers. The Purchasers include certain existing and new institutional and other
accredited investors. Pursuant to the Purchase Agreements, we, in a private placement in reliance on the exemption from the registration requirements of
the Securities Act, agreed to issue and sell to the Purchasers an aggregate of approximately 17.6 million unregistered shares of our common stock at a price
per share of $2.485 or, gross aggregate proceeds equal to approximately $43.7 million. Each share issued was accompanied by a warrant to purchase one
share of our common stock, or the Warrant Shares, at an exercise price equal to $2.36. We have agreed to file a registration statement with the Commission
to register for resale the shares issued in the private placement, including the Warrant Shares.

Pegunigalsidase alfa (PRX-102), our proprietary plant cell culture expressed enzyme in development for the treatment of Fabry disease, is our most
advanced product candidate. Our PRX-102 phase III clinical program of PRX-102 for the treatment of Fabry disease includes three separate studies: the
BALANCE, BRIDGE and BRIGHT studies. The studies are designed to evaluate the potential superiority of PRX-102 over current therapies, demonstrate
the potential for improved efficacy and better quality of life for patients with Fabry disease and demonstrate the safety of our drug/therapy. We are also
evaluating the potential of a once-monthly treatment regimen with a higher dose of PRX-102. Enrollment has been completed in each of the BALANCE,
BRIDGE and BRIGHT clinical studies.

On February 5, 2019, we announced preliminary pharmacokinetic (PK) data from our phase III BRIGHT study. Data showed PRX-102 to be well-tolerated;
and infusion of 2 mg/kg PRX-102 administered every 4 weeks resulted in the presence of continuous active enzyme throughout the entire infusion interval.

We anticipate that, in coordination with Chiesi, a BLA will be filed with the FDA under an Accelerated Approval Pathway based on the completed
phase I/II clinical trials of PRX-102, and the safety and efficacy data from the ongoing BRIDGE study. In October 2019, we met, together with Chiesi, with
the FDA to discuss key information on PRX-102 to be included in the proposed BLA filing and reached alignment with the FDA on the Accelerated
Approval pathway for PRX-102.

On October 19, 2017, Protalix Ltd., our wholly-owned subsidiary, and Chiesi entered into the Chiesi Ex-US Agreement pursuant to which Chiesi was
granted an exclusive license for all markets outside of the United States to commercialize PRX-102. Under the terms and conditions of the Chiesi Ex-US
Agreement, Protalix Ltd. retained the right to commercialize PRX-102 in the United States. Under the Chiesi Ex-US Agreement, Chiesi made an upfront
payment to Protalix Ltd. of $25.0 million in connection with the execution of the agreement and Protalix Ltd. is entitled to additional payments of up to
$25.0 million in development costs, capped at $10.0 million per year. Protalix Ltd. is also eligible to receive an additional up to $320.0 million, in the
aggregate, in regulatory and commercial milestone payments. Chiesi is required to make tiered payments of 15% to 35% of its net sales, depending on the
amount of annual sales, as consideration for the supply of PRX-102.

On July 23, 2018, Protalix Ltd. entered into the Chiesi U.S. Agreement. Pursuant to the agreement, Chiesi was granted an exclusive license to
commercialize PRX-102 in the United States. Protalix Ltd. received an upfront, non-refundable, non-creditable payment of $25.0 million from Chiesi and
was entitled to additional payments of up to a maximum of $20.0 million to cover development costs for PRX-102, subject to a maximum of $7.5 million
per year. Protalix Ltd. is also eligible to receive an additional up to a maximum of $760.0 million, in the aggregate, in regulatory and commercial milestone
payments. Chiesi will also make tiered payments of 15% to 40% of its net sales under the Chiesi U.S. Agreement to Protalix Ltd., depending on the amount
of annual sales, subject to certain terms and conditions, as consideration for product supply. Protalix Ltd. agreed to manufacture all of the PRX-102 needed
for all purposes under both agreements, subject to certain exceptions, and Chiesi will purchase PRX-102 from Protalix Ltd., subject to certain terms and
conditions.

On May 1, 2012, the FDA approved for sale our first commercial product, taliglucerase alfa for injection, an ERT for the long-term treatment of adult
patients with a confirmed diagnosis of type 1 Gaucher disease. Subsequently, taliglucerase alfa was approved for marketing by the regulatory authorities of
other countries. Taliglucerase alfa is marketed under the name BioManguinhos alfataliglicerase in Brazil and certain other Latin American countries, and
under the name Elelyso in other territories.

Since its approval by the FDA, taliglucerase alfa has been marketed by Pfizer, as provided in the Pfizer Agreement. In October 2015, we entered into the
Amended Pfizer Agreement which amends and restates the Pfizer Agreement in its entirety. Pursuant to the Amended Pfizer Agreement, we sold to Pfizer
our share in the collaboration created under the initial Pfizer Agreement for the commercialization of Elelyso in exchange for a cash payment equal to
$36.0 million. Under the Amended Pfizer Agreement, Pfizer has an exclusive license to commercialize Elelyso worldwide other than Brazil; we maintain
full rights to BioManguinhos alfataliglicerase in Brazil. We will continue to manufacture drug substance for Pfizer, subject to certain terms and conditions.
Under the Amended Pfizer Agreement, Pfizer is responsible for 100% of expenses, and entitled to all revenues globally for Elelyso, excluding Brazil,
where we are responsible for all expenses and retain all revenues.

On June 18, 2013, we entered into the Brazil Agreement with Fiocruz, an arm of the Brazilian MoH, for BioManguinhos alfataliglicerase. Fiocruz’s
purchases of BioManguinhos alfataliglicerase to date have been significantly below certain agreed-upon purchase milestones. We are continuing to supply
BioManguinhos alfataliglicerase to Fiocruz under the Brazil Agreement, and patients continue to be treated with BioManguinhos alfataliglicerase in Brazil.
We are discussing with Fiocruz potential actions that Fiocruz may take to comply with its purchase obligations and, based on such discussions, we will
determine what we believe to be the course of action that is in our best interest.

We are developing an innovative product pipeline using our ProCellEx protein expression system. Our product pipeline currently includes, among other
candidates:

(1) pegunigalsidase alfa, or PRX-102, a therapeutic protein candidate for the treatment of Fabry disease, a rare, genetic lysosomal disorder in humans,
currently in ongoing phase III clinical trials.

(2) OPRX-106, our oral anti-TNF product candidate which is being developed as an orally-delivered anti-inflammatory treatment using plant cells as a
natural capsule for the expressed protein. We released final data generated in our phase IIa clinical trial of OPRX-106 for the treatment of ulcerative colitis
in March 2018. Additional data was released in June 2018.

(3) alidornase alfa, or PRX-110, a plant cell expressed recombinant human DNase I chemically modified to resist inhibition by actin, thus enhancing
enzymatic activity. We have completed a phase IIa efficacy and safety study of alidornase alfa for the treatment of Cystic Fibrosis.

(4) PRX-115, our plant cell-expressed recombinant PEGylated Uricase (Urate Oxidase) – a chemically modified enzyme to treat Gout.

We have licensed the rights to commercialize taliglucerase alfa worldwide (other than Brazil) to Pfizer, and the rights to commercialize pegunigalsidase
alfa worldwide to Chiesi. Otherwise, we hold the worldwide commercialization rights to our other proprietary development candidates. In addition, we
continuously evaluate potential strategic marketing partnerships as well as collaboration programs with biotechnology and pharmaceutical companies and
academic research institutes.

Critical Accounting Policies

Our significant accounting policies are more fully described in note 1 to our consolidated financial statements appearing at the end of this Annual Report on
Form 10-K. We believe that the accounting policies below are critical for one to fully understand and evaluate our financial condition and results of
operations.

The discussion and analysis of our financial condition and results of operations is based on our financial statements, which we prepared in accordance with
U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported
revenues and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater
detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions.

Functional Currency

The currency of the primary economic environment in which our operations are conducted is the U.S. dollar. All of our revenues are derived in dollars. In
addition, most of our expenses and capital expenditures are incurred in dollars, and the major source of our financing has been provided in dollars.

Revenues

Our primary sources of revenues include our sales of BioManguinhos alfataliglicerase in Brazil and of drug substance to Pfizer under our Amended Pfizer
Agreement. We recognize revenue from the Amended Pfizer at a point in time when control over the product is transferred to customers (upon delivery).

We also generate revenues from the Chiesi agreements. According to accounting standard ASC 606, Revenue from Contracts with Customers, and all the
related amendments, or ASC 606, a performance obligation is a promise to provide a distinct good or service or a series of distinct goods or services.
Goods and services that are not distinct are bundled with other goods or services in the contract until a bundle of goods or services that is distinct is created.
A good or service promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources
that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other
promises in the contract.

We have identified two performance obligations in the Chiesi agreements as follows: (1) the license and research and development services and (2)
contingent performance obligation regarding future manufacturing.

We determined that the license together with the research and development services should be combined into single performance obligation since Chiesi
cannot benefit from the license without the research and development services. The research and development services are highly specialized and are
dependent on the supply of the drug.

The future manufacturing is contingent on regulatory approvals of the drug and we deem these services to be separately identifiable from other
performance obligations in the contract. Manufacturing services post-regulatory approval are not interdependent or interrelated with the license and
research and development services.

The transaction price was comprised of fixed consideration and variable consideration (capped research and development reimbursements). Under ASC
606, the consideration to which we would be entitled upon the achievement of contractual milestones, which are contingent upon the occurrence of future
events, are a form of variable consideration. We estimate variable consideration using the most likely method. Amounts included in the transaction price
are recognized only when it is probable that a significant reversal of cumulative revenues will not occur. Prior to recognizing revenue from variable
consideration, we use significant judgment to determine the probability of a significant reversal of such revenue.

Since the customer benefits from the research and development services as the entity performs the service, revenue from granting the license and the
research and development services is recognized over time using the cost-to-cost method. We used significant judgment when we determined the costs
expected to be incurred upon satisfying the identified performance obligation.

Revenue from additional research and development services ordered by Chiesi is recognized over time using the cost-to-cost method.

We accounted for the Chiesi US agreement as a modification of the Chiesi Ex-US agreement. As such, we recorded revenue through a cumulative catch-up
adjustment.

Our revenue recognition accounting policy prior to January 1, 2019, was materially the same.

Research and Development Expense

We expect our research and development expense to remain our primary expense in the near future as we continue to develop our product candidates.
Research and development expense consists of:

·
·
·
·
·
·

internal costs associated with research and development activities;
payments made to third party contract research organizations, investigative/clinical sites and consultants;
manufacturing development costs;
personnel-related expenses, including salaries, benefits, travel, and related costs for the personnel involved in research and development;
activities relating to the advancement of product candidates through preclinical studies and clinical trials; and
facilities and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, as well as
laboratory and other supplies.

The following table identifies our current major research and development projects:

Project
PRX-102 – pegunigalsidase alfa

Status
Phase III clinical
trials fully-enrolled
and ongoing

OPRX-106 – Oral anti-TNF

Phase IIa completed

Expected Near Term Milestones
BLA submission under Accelerated
Approval pathway, disclosure of
final results of BRIDGE and
BRIGHT studies

Evaluate potential partnership
for next-step clinical development

PRX-110 – alidornase alfa

Phase IIa completed

Evaluate potential partnership

PRX-115 – Uricase

Preclinical

We anticipate incurring increasing costs in connection with the continued development of all of the product candidates in our pipeline. Our internal
resources, employees and infrastructure are not tied to any individual research project and are typically deployed across all of our projects. We currently do
not record and maintain research and development costs per project.

The costs and expenses of our projects are partially funded by grants we have received from NATI. Each grant is deducted from the related research and
development expenses as the costs are incurred. For additional information regarding the grant process, see “Business—Israeli Government Programs—
Encouragement of Industrial Research, Development and Technology Innovation, 1984” in Item 1 of this Annual Report. There can be no assurance that
we will continue to receive grants from NATI in amounts sufficient for our operations, if at all. In addition, under the two Chiesi Agreements, Protalix Ltd.
is entitled to payments of up to $45.0 million in the aggregate to cover development costs for pegunigalsidase alfa, capped at $17.5 million per year. As of
December 31, 2019, we have received, or are entitled to receive, reimbursements equal to $40.1 million from Chiesi and additional payments equal to
approximately $9.1 million in connection with the performance of extension studies.

At this time, due to the inherently unpredictable nature of preclinical and clinical development processes and given the early stage of our preclinical
product development programs, we are unable to estimate with any certainty the costs we will incur in the continued development of the product candidates
in our pipeline for potential commercialization. Clinical development timelines, the probability of success and development costs can differ materially from
expectations. The current focus of our product development efforts are on pegunigalsidase alfa. Our future research and development expenses for
pegunigalsidase alfa and the other product candidates will depend on the clinical success of each product candidate, as well as ongoing assessments of each
product candidate’s commercial potential. In addition, we cannot forecast with any degree of certainty which product candidates may be subject to future
collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital
requirements. See “Risk Factors—If we are unable to develop and commercialize our product candidates, our business will be adversely affected” and “—
We may not obtain the necessary U.S., EMA or other worldwide regulatory approvals to commercialize our drug candidates in a timely manner, if at all,
which would have a material adverse effect on our business, results of operations and financial condition.”

We expect our research and development expenses to continue to be our primary expense in the future as we continue the advancement of our clinical trials
and preclinical product development programs for our product candidates, particularly with respect to the development of pegunigalsidase alfa. The lengthy
process of completing clinical trials and seeking regulatory approvals for our product candidates requires expenditure of substantial resources. Any failure
or delay in completing clinical trials, or in obtaining regulatory approvals, could cause a delay in generating product revenue and cause our research and
development expense to increase and, in turn, have a material adverse effect on our operations. Due to the factors set forth above, we are not able to
estimate with any certainty when we would recognize any net cash inflows from our projects. See “Risk Factors—Clinical trials are very expensive, time-
consuming and difficult to design and implement and may result in unforeseen costs which may have a material adverse effect on our business, results of
operations and financial condition.”

Share-Based Compensation

The discussion below relates to our share-based compensation.

In accordance with the guidance, we record the benefit of any grant to a non-employee and remeasure the benefit in any future vesting period for the
unvested portion of the grants, as applicable. In addition, we use the straight-line accounting method for recording the benefit of the entire grant, unlike the
accelerated method we use to record grants made to employees.

We measure share-based compensation cost for all share-based awards at the fair value on the grant date and recognition of share-based compensation over
the service period for awards that we expect will vest. The fair value of stock options is determined based on the number of shares granted and the price of
our ordinary shares, and calculated based on the Black-Scholes valuation model. We recognize such value as expense over the service period using the
accelerated method.

The guidance requires companies to estimate the expected term of the option rather than simply using the contractual term of an option. Because of lack of
sufficient data on past option exercises by employees, the expected term of the options could not be based on historic exercise patterns. Accordingly, we
adopted the simplified method, according to which companies may calculate the expected term as the average between the vesting date and the expiration
date, assuming the option was granted as a “plain vanilla” option.

In performing the valuation, we assumed an expected 0% dividend yield in the previous years and in the next years. We do not have a dividend policy and
given the lack of profitability, dividends are not expected in the foreseeable future, if at all. The guidance stipulates a number of factors that should be
considered when estimating the expected volatility, including the implied volatility of traded options, historical volatility and the period that the shares of
the company are being publicly traded.

The risk-free interest rate used in the valuation of the options is based on the implied yield of U.S. federal reserve zero–coupon government bonds. The
remaining term of the bonds used for each valuation was equal to the expected term of the grant. This methodology has been applied to all grants valued by
us. The guidance requires the use of a risk–free interest rate based on the implied yield currently available on zero–coupon government issues of the
country in whose currency the exercise price is expressed, with a remaining term equal to the expected life of the option being valued. This requirement has
been applied for all grants valued as part of this report.

Convertible Notes

All outstanding convertible notes are accounted for using the guidance set forth in the Financial Accounting Standards Board, or FASB, Accounting
Standards Codification (ASC) 815 requiring that we determine whether the embedded conversion option must be separated and accounted for separately.
ASC 470-20 regarding debt with conversion and other options requires the issuer of a convertible debt instrument that may be settled in cash upon
conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s
nonconvertible debt borrowing rate. We accounted for the 4.5% convertible notes, which we refer to as the 2018 Notes, as liability, on an aggregated basis,
in their entirety.

Our 2021 Notes were accounted for partially as liability and equity components of the instrument and partially as a debt host contract with an embedded
derivative resulting from the conversion feature. During the year ended December 31, 2017, the embedded derivative was reclassified to additional paid in
capital.

Issuance costs regarding the issuance of the 2021 Notes are amortized using the effective interest rate.

During the year ended December 31, 2018, note holders converted $1.15 million aggregate principal amount of the 2021 Notes into a total of 153,742
shares of Common Stock and cash payments of approximately $15,887, in the aggregate. In addition, in June 2018, we exchanged $3.42 million aggregate
principal amount of our outstanding 4.50% convertible promissory notes due 2018, which we refer to as the 2018 Notes, for 261,363 shares of common
stock and approximately $2.23 million in cash and delivered the necessary funds under the indenture governing the 2018 Notes, which was $2.53 million.
On September 15, 2018, the 2018 Notes matured and have been paid in full. There were no note conversions during the year ended December 31, 2019.

As of December 31, 2019, a total of $57.9 million aggregate principal amount of the 2021 Notes were outstanding. In addition, as of December 31, 2019,
none of the 2018 Notes were outstanding.

Year ended December 31, 2019 Compared to the Year Ended December 31, 2018

Revenues from Selling Goods

We recorded revenues of $15.9 million for the year ended December 31, 2019, an increase of $6.9 million, or 77%, compared to revenues of $9.0 million
for the year ended December 31, 2018. The increase resulted primarily from an increase of $5.5 million in sales of drug product to Brazil as well as an
increase of $1.4 million in sales of drug substance to Pfizer.

Revenues from License and R&D services

We recorded revenues from license and R&D services of $38.8 million for the year ended December 31, 2019, an increase of $13.5 million compared to
revenues of $25.3 million for the year ended December 31, 2018. Revenues from the license agreements represent the revenues we recognized in
connection with the Chiesi Agreements. The increase is primarily due to revenues recognized in connection with additional studies performed and with
revenues recognized in connection with an anticipated milestone payment.

Cost of Goods Sold

Cost of goods sold was $10.9 million for the year ended December 31, 2019, an increase of $1.6 million or 17%, compared to cost of goods sold of
$9.3 million for the year ended December 31, 2018. The increase is primarily due to an increase in sales of goods.

Research and Development Expenses, Net

Research and development expenses, net were $44.6 million for the year ended December 31, 2019, an increase of $11.3 million, or 34% from
$33.3 million for the year ended December 31, 2018. The increase resulted primarily from an increase of $9.1 million in clinical trial related costs as well
as a decrease of $2.1 million in grants received from the Israeli Innovation Authority.

We expect research and development expenses to continue to be our primary expense.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $9.9 million for the year ended December 31, 2019, a decrease of $1.0 million, or 9%, from
$10.9 million for the year ended December 31, 2018. The decrease resulted primarily due to costs related to the Chiesi US Agreement we entered into in
2018, which were not incurred in 2019.

Financial Expenses and Income, Net

Financial expense, net was $7.6 million for the year ended December 31, 2019, an increase of $0.5 million, or 7%, compared to financial expenses of
$7.1 million for the year ended December 31, 2018. Financial expenses are comprised primarily of interest expense on our outstanding convertible notes
equal to $4.3 million and $4.6 million for the years ended December 31, 2019 and 2018, respectively. The increase is primarily due to an increase in costs
related to amortization of debt issuance costs and debt discount of $0.4 million, as well as to exchange rate differences.

Year ended December 31, 2018 Compared to the Year Ended December 31, 2017

Revenues from Selling Goods

We recorded revenues of $9.0 million for the year ended December 31, 2018, a decrease of approximately $10.2 million, or 53%, compared to revenues of
$19.2 million for the year ended December 31, 2017. Revenues include $3.7 million of products sold in Brazil and $5.3 million of drug substance sold to
Pfizer. The decrease resulted from a decrease of $6.9 million in sales of drug substance to Pfizer and $3.4 million in sales of drug product to Brazil.

Revenues from License and R&D services

We recorded revenues of $25.3 million for the year ended December 31, 2018, an increase of $23.5 million compared to revenues of $1.8 million for the
year ended December 31, 2017. Revenues from the license agreements represent the revenues we recognized in connection with the Chiesi agreements
including a cumulative catch-up adjustment in the third quarter in the amount of $6.2 million.

Cost of Goods Sold

Cost of goods sold was $9.3 million for the year ended December 31, 2018, a decrease of $5.9 million, or 39%, compared to the cost of revenues of
$15.2 million for the year ended December 31, 2017.

Research and Development Expenses

Research and development expenses were $35.5 million for the year ended December 31, 2018, an increase of $3.3 million, or 10% from $32.2 million for
the year ended December 31, 2017. The increase resulted primarily from an increase in clinical trial activity during 2018.

We expect research and development expenses to continue to be our primary expense as we enter into a more advanced stage of preclinical and clinical
trials for certain of our product candidates, primarily with respect to pegunigalsidase alfa.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $10.9 million for the year ended December 31, 2018, a decrease of $0.6 million, or 5%, from
$11.5 million for the year ended December 31, 2017. The decrease resulted primarily from a decrease in sales expenses.

Financial Expenses and Income

Financial expense was $7.1 million for the year ended December 31, 2018, compared to financial expenses of $48.9 million for the year ended
December 31, 2017. Financial expenses for the year ended December 31, 2017 included a charge of $38.1 million as a result of the re-measurement of the
fair value of the 2021 Notes embedded derivative. In addition, financial expenses are comprised primarily from interest expense on our outstanding
convertible notes.

Liquidity and Capital Resources

Our sources of liquidity include our cash balances. At December 31, 2019, we had $17.8 million in cash and cash equivalents. We have primarily financed
our operations through equity and debt financings, business collaborations, and grant funding. In the fourth quarter of 2017, Chiesi made a payment to
Protalix Ltd. of $25.0 million in connection with the execution of the Chiesi Ex-US Agreement and in the third quarter of 2018, Chiesi made a payment to
Protalix Ltd. of $25.0 million in connection with the execution of the Chiesi US Agreement.

During the year ended December 31, 2019, we received total proceeds of approximately $30.2 million from expense reimbursements in relation to our
collaboration with Chiesi and, during the same period, we were entitled to receive total proceeds of approximately $15.2 million from sales of
BioManguinhos alfataliglicerase to Fiocruz and sales of drug substance to Pfizer.

Cash Flows

Net cash used in operations was $19.4 million for the year ended December 31, 2019. The net loss for the year ended December 31, 2019 of $18.3 million
was further increased by a $9.6 million decrease in contracts liability, which was partially offset by an increase of $2.7 million in accounts payable and
accruals, and by $3.0 million amortization of debt issuance costs and debt discount. Net cash used in investing activities for the year ended December 31,
2019 was $0.9 million and consisted primarily of purchase of property and equipment, and an increase in restricted deposit. On March 12, 2020, we entered
into securities purchase agreements with certain purchasers for the sale of common stock and warrants for aggregate gross proceeds of $43.7 million.

Future Funding Requirements

We expect to continue to incur significant expenditures in the near future, including significant research and development expenses related primarily to the
clinical trials of PRX-102. Our material cash needs for the next 24 months will include, among other expenses, (i) costs of preclinical and clinical trials, (ii)
employee salaries, (iii) payments for rent and operation of our manufacturing facilities, (iv) fees to our consultants and legal advisors, patents and fees for
service providers in connection with our research and development efforts and (v) payment of principal and interest on our outstanding convertible
promissory notes and other debt. We believe that the funds currently available to us are sufficient to satisfy our capital needs for at least 12 months.

We may be required to raise additional capital in the future in order to develop and commercialize our product candidates and continue research and
development activities. Our ability to raise capital, and the amounts of necessary capital, will depend on many other factors, including:

· our ability to maintain the listing of our common stock with the NYSE American;

· our efforts, combined with those of Chiesi, to commercialize PRX-102;

· our progress in commercializing BioManguinhos alfataliglicerase in Brazil;

· the costs of commercialization activities, including product marketing, sales and distribution;

· the progress and results of our clinical trials, particularly our clinical trials of PRX-102;

· the duration and cost of discovery and preclinical development and laboratory testing and clinical trials for our product candidates;

· conversions of our 2021 Notes from time to time;

· the timing and outcome of regulatory review of our product candidates; and

· the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims and other intellectual property

rights.

We expect to finance our future cash needs through corporate collaborations, licensing or similar arrangements, public or private equity offerings and/or
debt financings. We currently do not have any commitments for future external funding, except with respect to the development-related payments and
milestone payments that may become payable under the Chiesi Agreements.

Our management is in the process of evaluating refinancing and restructuring alternatives, including a restructuring of our outstanding convertible notes,
and related transactions. However, there is no certainty about our ability to obtain such funding.

Effects of Currency Fluctuations

Currency fluctuations could affect us through increased or decreased acquisition costs for certain goods and services. We do not believe currency
fluctuations have had a material effect on our results of operations during the years ended December 31, 2017, 2018 or 2019.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements as of December 31, 2018 and 2019.

Recently Issued Accounting Pronouncements

Certain recently issued accounting pronouncements are discussed in note 1p of the financial statements included in Item 8 of this Annual Report on Form
10-K.

Contractual Obligations

The following table summarizes our significant contractual obligations at December 31, 2019:

(U.S. dollars in thousands)
Convertible notes - interest
Convertible notes – principal amount
Operating lease obligations
Purchase obligations (1)
Certain clinical contract
Liability for employee rights upon retirement
Total

Total

Less than
1 year

1-3 years

3-5 years

More
than 5
years

$
$
$
$
$
$
$

8,688 $
57,918
2,152 $
4,772 $
9,820 $
2,565
85,915 $

4,344 $
$
1,240 $
4,556 $
6,909 $

4,344
57,918
912
216
2,911

17,049 $

66,301

$
$

2,565
2,565

(1) Represents open purchase orders issued to certain suppliers and other vendors mainly in connection with our research and development activities that
were outstanding as of December 31, 2019.

The foregoing table does not include (i) annual license fees, which are immaterial, (ii) payments we may be required to make to certain of our licensors in
the time periods set forth above upon the achievement of agreed-upon milestones and (iii) royalty payments payable by us to certain of our licensors in
connection with the commercial sale of our product candidates, if any. If all of the contingencies with respect to milestone payments under our research and
license agreements are met, the aggregate milestone payments payable would be approximately $14.3 million, and would be payable, if at all, as our
projects progress over the course of a number of years. The royalty payments payable by our company in connection with sales of each of our product
candidates, if any, shall not exceed low, single-digit percentages of net sales of the product.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Currency Exchange Risk

The currency of the primary economic environment in which our operations are conducted is the dollar. Most of our revenues and approximately 50% of
our expenses and capital expenditures are incurred in dollars, and a significant source of our financing has been provided in U.S. dollars. Since the dollar is
the functional currency, monetary items maintained in currencies other than the dollar are remeasured using the rate of exchange in effect at the balance
sheet dates and non-monetary items are remeasured at historical exchange rates. Revenue and expense items are remeasured at the average rate of exchange
in effect during the period in which they occur. Foreign currency translation gains or losses are recognized in the statement of operations.

Approximately 40% of our costs, including salaries, expenses and office expenses, are incurred in NIS. Inflation in Israel may have the effect of increasing
the U.S. dollar cost of our operations in Israel. If the U.S. dollar declines in value in relation to the NIS, it will become more expensive for us to fund our
operations in Israel. A revaluation of 1% of the NIS will affect our loss before tax by less than 1%. The exchange rate of the U.S. dollar to the NIS, based
on exchange rates published by the Bank of Israel, was as follows:

Average rate for period
Rate at year-end

Year Ended December 31,
2018
3.595
3.748

2017
3.600
3.467

2019
3.565
3.456

To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financial
exposure from fluctuations in the exchange rate of the U.S. dollar against the NIS. These measures, however, may not adequately protect us from material
adverse effects due to the impact of inflation in Israel.

Interest Rate Risk

Our exposure to market risk is confined to our cash and cash equivalents. We consider all short term, highly liquid investments, which include short-term
deposits with original maturities of three months or less from the date of purchase, that are not restricted as to withdrawal or use and are readily convertible
to known amounts of cash, to be cash equivalents. The primary objective of our investment activities is to preserve principal while maximizing the interest
income we receive from our investments, without increasing risk. We invest any cash balances primarily in bank deposits and investment grade interest-
bearing instruments. We are exposed to market risks resulting from changes in interest rates. We do not use derivative financial instruments to limit
exposure to interest rate risk. Our interest gains may decline in the future as a result of changes in the financial markets.

Item 8.

Financial Statements and Supplementary Data

See the Index to Consolidated Financial Statements on Page F-1 attached hereto.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered
by this Form 10-K. The controls evaluation was conducted under the supervision and with the participation of management, including our Chief Executive
Officer and Chief Financial Officer. Disclosure controls and procedures are controls and procedures designed to reasonably assure that information required
to be disclosed in our reports filed under the Exchange Act, such as this Form 10-K, is recorded, processed, summarized and reported within the time
periods specified in the Commission’s rules and forms. Disclosure controls and procedures are also designed to reasonably assure that such information is
accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.

The evaluation of our disclosure controls and procedures included a review of the controls’ objectives and design, our implementation of the controls and
their effect on the information generated for use in this Annual Report on Form 10-K. This type of evaluation will be performed on a quarterly basis so that
the conclusions of management, including the Chief Executive Officer and Chief Financial Officer, concerning the effectiveness of the disclosure controls
and procedures can be reported in our periodic reports on Form 10-Q and Form 10-K. The overall goals of these various evaluation activities are to monitor
our disclosure controls and procedures, and to modify them as necessary. Our intent is to maintain the disclosure controls and procedures as dynamic
systems that change as conditions warrant.

Based on the controls evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this
Form 10-K, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our
Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the Commission, and that material information
related to our company and our consolidated subsidiaries are made known to management, including the Chief Executive Officer and Chief Financial
Officer, particularly during the period when our periodic reports are being prepared.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance
regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally
accepted accounting principles. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of
records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and
that receipts and expenditures of our company are being made only in accordance with authorizations of management and our directors; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect
on our financial statements.

Management assessed our internal control over financial reporting as of December 31, 2019, the end of our fiscal year. Management based its assessment
on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Management’s assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting
controls, process documentation, accounting policies and our overall control environment.

Based on our assessment, management has concluded that our internal control over financial reporting was effective as of the end of the fiscal year to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in
accordance with U.S. generally accepted accounting principles. We reviewed the results of management’s assessment with the Audit Committee of our
Board of Directors.

The effectiveness of our internal control over financial reporting as of December 31, 2019 has been audited by Kesselman & Kesselman, an independent
registered public accounting firm, as stated in their report included herein.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our
internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues
and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can
be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by
collusion of two or more people or by management override of the controls. The design of any system of controls is based in part on certain assumptions
about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate
because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in internal controls

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15f and 15d-15f under the Exchange Act) that occurred
during the quarter ended December 31, 2019 that have materially affected, or that are reasonably likely to materially affect, our internal control over
financial reporting.

Item 9B. Other Information

None.

Item 10. Directors, Executive Officers and Corporate Governance

PART III

The information in our 2020 Proxy Statement regarding directors and executive officers appearing under the headings “Security Ownership of Certain
Beneficial Owners and Management— Section 16(a) Beneficial Ownership Reporting Compliance” and “Election of Directors” is incorporated by
reference in this section.

Item 11. Executive Compensation

The information appearing in our 2020 Proxy Statement under the headings “Director Compensation,” “Compensation Discussion and Analysis,” “Report
of the Compensation Committee,” and “Executive Compensation” is incorporated by reference in this section.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information appearing in our 2020 Proxy Statement under the heading “Security Ownership of Certain Beneficial Owners and Management” is
incorporated by reference in this section.

Equity Compensation Plan Information

The following table provides information as of December 31, 2019 with respect to the shares of our common stock that may be issued under our existing
equity compensation plan.

Plan Category
Equity Compensation Plans Approved by Stockholders
Equity Compensation Plans Not Approved by Stockholders

Total

Number of Securities
to be Issued
Upon Exercise of
Outstanding Options

Weighted Average
Exercise Price of
Outstanding Options

C
Number of Securities Remaining
Available for Future Issuance
Under Equity Compensation Plans
(Excluding Securities Reflected in
Column A)

1,055,197 $
-
1,055,197 $

13.34
-
13.34

690,182
-
690,182

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information appearing in our 2020 Proxy Statement under the headings “Election of Directors—Corporate Governance” and “—Certain Relationships
and Related Transactions” is incorporated by reference in this section.

Item 14. Principal Accountant Fees and Services

The information appearing in our 2020 Proxy Statement under the heading “Ratification of Appointment of Independent Registered Public Accounting
Firm” is incorporated by reference in this section.

PART IV

Item 15. Exhibits and Financial Statement Schedules

The following documents are filed as part of this Annual Report on Form 10-K:

1. Financial Statements. The following Consolidated Financial Statements of Protalix BioTherapeutics, Inc. are included in Item 8 of this Annual

Report on Form 10-K:

Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2018 and 2019
Consolidated Statements of Operations for the years ended December 31, 2017, 2018 and 2019
Consolidated Statements of Changes in Capital Deficiency for the years ended December 31, 2017, 2018 and 2019
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2018 and 2019
Notes to Consolidated Financial Statements

Page

F-2
F-4
F-5
F-6
F-7
F-9

2. Financial Statement Schedule. Financial statement schedules have been omitted since they are either not required, are not applicable or the

required information is shown in the consolidated financial statements or related notes.

3. Exhibits.

Exhibit
Number
3.1

Certificate of Incorporation of the Company

Exhibit Description

Incorporated by Reference
File
Number
333-48677

Exhibit
3.1

Date
April 1, 2016

Form
8-K

Filed
Herewith

3.2

Amendment to Certificate of Incorporation of the

Def 14A

001-33357

Appen. A

July 1, 2016

Company

3.3

Second Amendment to Certificate of Incorporation of

Def 14A

001-33357

Appen. A

October 10, 2018

the Company

3.4

Third Amendment to Certificate of Incorporation of the

8-K

001-33357

3.1

December 19, 2019

3.5

4.1

4.2

Company

Bylaws of the Company

Form of Restricted Stock Agreement/Notice

Indenture, dated as of December 7, 2016, between
Protalix BioTherapeutics, Inc. the guarantors party
thereto, The Bank of New York Mellon Trust
Company, N.A., as trustee and Wilmington Savings
Fund Society, FSB, as collateral agent

8-K

001-33357

3.2

4.1

October 17, 2018

July 18, 2012

December 7, 2016

4.3

Form of 7.50% Convertible Note due 2018 (Issued in

8-K

001-33357

4.2

December 7, 2016

Financing)

4.4

Form of 7.50% Convertible Note due 2018 (Issued in

8-K

001-33357

4.3

December 7, 2016

Exchange)

4.5

First Supplemental to Indenture, dated as of July 24,

8-K

001-33357

4.2

July 25, 2017

2017, by and among Protalix BioTherapeutics, Inc., the
guarantors party thereto, The Bank of New York
Mellon Trust Company, N.A., as trustee, and
Wilmington Savings Fund Society, FSB, as collateral
agent

4.6

Second Supplemental Indenture, dated as of November
27, 2017, by and among Protalix BioTherapeutics, Inc.,
the guarantors party hereto and The Bank of New York
Mellon Trust Company, N.A., as trustee, registrar,
paying agent and conversion agent

8-K

001-33357

4.1

December 1, 2017

4.7

Description of Capital Stock

10.1

2006 Stock Incentive Plan, as amended

Def 14A

001-33357

Annex A

March 6, 2018

10.2

Employment Agreement between Protalix Ltd. and
Yoseph Shaaltiel, dated as of September 1, 2004

8-K

001-33357

10.3

January 8, 2007

10.3

Employment Agreement between Protalix Ltd. and

8-K

001-33357

10.3

January 8, 2007

Einat Almon, dated as of December 19, 2004

10.4

Lease Agreement between Protalix Ltd. and Angel

8-K

001-33357

10.9

January 8, 2007

Science Park (99) Ltd., dated as of October 28, 2003 as
amended on April 18, 2005

10.5

Unprotected Lease Agreement

10.6† Amended and Restated Agreement between Protalix

Ltd. and Comercio e Serviços Ltda. dated June 17, 2013

10.7† Technology Transfer and Supply Agreement made as of
June 18, 2013 by and between Protalix Ltd. and
Fundação Oswaldo Cruz

10-K

10-Q

001-33357

10.21

March 17, 2008

001-33357

10.1

May 8, 2014

10-Q

001-33357

10.3

May 8, 2014

10.8

Employment Agreement with Moshe Manor dated

8-K

001-33357

10.1

September 29, 2014

September 28, 2014

10.9† Amended and Restated Exclusive License and Supply

10-Q/A

001-33357

10.1

December 11, 2015

Agreement by and between Pfizer Inc. and Protalix
Ltd., dated October 12, 2015

10.10 Form of Note Purchase Agreement, dated of December

8-K

001-33357

10.1

December 7, 2016

1, 2016 among Protalix BioTherapeutics, Inc. and the
Purchasers

10.11 Form of Exchange Agreement, dated of December 1,

8-K

001-33357

10.2

December 7, 2016

2016 among Protalix BioTherapeutics, Inc. and the
Existing Holders

10.12 Form of U.S. Security Agreement, dated of December

8-K

001-33357

10.3

December 7, 2016

7, 2016 among Protalix BioTherapeutics, Inc., the
guarantors party thereto and Wilmington Savings Fund
Society, FSB, as collateral agent

10.13 Form of Security Agreement/Debenture, dated of

8-K

001-33357

10.4

December 7, 2016

December 7, 2016 between Protalix BioTherapeutics,
Inc. and Altshuler Shaham Trusts Ltd., as security
trustee

10.14† Exclusive License and Supply Agreement dated as of
October 17, 2017, made by and between Protalix Ltd.
and Chiesi Farmaceutici S.p.A.

10-K

001-33357

10.16

March 6, 2018

10.15† Exclusive U.S. License and Supply Agreement dated as

10-Q

001-33357

10.1

November 7, 2018

of July 23, 2018, made by and between Protalix Ltd.
and Chiesi Farmaceutici S.p.A.

10.16 Employment Agreement made effective as of May 20,

8-K

001-33357

10.1

May 21, 2019

2019, by and between Protalix Ltd. and Mr. Dror
Bashan

10.17 Employment Agreement made effective as of July 28,

8-K

001-33357

10.1

July 29, 2019

2019, by and between Protalix Ltd. and Mr. Eyal Rubin

21.1

Subsidiaries

10-K

001-33357

21.1

February 26, 2010

23.1

Consent of Kesselman & Kesselman, Certified Public

Accountants (Isr.), A member of
PricewaterhouseCoopers International Limited,
independent registered public accounting firm for the
Registrant

31.1

Certification of Chief Executive Officer pursuant to

Rule 13a-14(a) as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer pursuant to

Rule 13a-14(a) as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002

32.1

32.2

18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, Certification
of Chief Executive Officer

18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, Certification
of Chief Financial Officer

101.INS XBRL INSTANCE FILE

101.SCH XBRL SHEMA FILE

101.CAL XBRL CALCULATION FILE

101.DEF XBRL DEFINITION FILE

101.LAB XBRL LABEL FILE

101.PRE XBRL PRESENTATION FILE

† Portions of this exhibit were omitted and have been filed separately with the Secretary of the Securities and Exchange Commission pursuant to the
Registrant’s application requesting confidential treatment under Rule 24b-2 of the Exchange Act.

Item 16. Form 10-K Summary

None.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, as of March 12, 2020.

SIGNATURES

PROTALIX BIOTHERAPEUTICS, INC.

By: /s/ Dror Bashan
Dror Bashan

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dror Bashan and Eyal Rubin,
and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.

/s/ Dror Bashan

/s/ Eyal Rubin

Signature

Dror Bashan

Eyal Rubin

/s/ Zeev Bronfeld

Zeev Bronfeld

/s/ Amos Bar Shalev

Amos Bar Shalev

/s/ Pol F. Boudes

Pol F. Boudes, M.D.

/s/ David Granot

David Granot

/s/ Gwen A. Melincoff

Gwen A. Melincoff

/s/ Aharon Schwartz

Aharon Schwartz, Ph.D.

Title

Date

President, Chief Executive Officer
(Principal Executive Officer) and Director

Chief Financial Officer, Treasurer and
Secretary (Principal Financial
and Accounting Officer)

Chairman of the Board

Director

March 12, 2020

PROTALIX BIOTHERAPEUTICS, INC.
CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 2018 and 2019
Consolidated Statements of Operations for the years ended December 31, 2017, 2018 and 2019
Consolidated Statements of Changes in Capital Deficiency for the years ended December 31, 2017, 2018 and 2019
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2018 and 2019
Notes to Consolidated Financial Statements

F-1

Page
F-2

F-4
F-5
F-6
F-7
F-9

Report of Independent Registered Public Accounting Firm

To the board of directors and stockholders of Protalix Biotherapeutics, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Protalix BioTherapeutics, Inc. and its subsidiaries (the “Company”) as of December 31,
2019 and 2018, and the related consolidated statements of operations, changes in capital deficiency and cash flows for each of the three years in the period
ended December 31, 2019 including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the
Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of
December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in
conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in note 1p to the consolidated financial statements, the Company changed the manner in which it accounts for leases during the year ended
December 31, 2019.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial
Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s
internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Kesselman & Kesselman, Trade Tower, 25 Hamered Street, Tel-Aviv 6812508, Israel, P.O Box 5005 Tel-Aviv 6150001
Telephone: +972 -3- 7954555, Fax:+972 -3- 7954556, www.pwc.co.il

F-2

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective
internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

/S/ Kesselman & Kesselman
Certified Public Accountants (Isr.)
A member of PricewaterhouseCoopers International Limited

Tel Aviv, Israel

March 12, 2020

We have served as the Company’s auditor since 2000.

F-3

PROTALIX BIOTHERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents
Accounts receivable – Trade
Other assets
Inventories

Total current assets

NON-CURRENT ASSETS:

Funds in respect of employee rights upon retirement
Property and equipment, net
Operating lease right of use assets

Total assets

LIABILITIES NET OF CAPITAL DEFICIENCY

CURRENT LIABILITIES:

Accounts payable and accruals:

Trade
Other

Operating lease liabilities
Contracts liability
Promissory note

Total current liabilities

LONG TERM LIABILITIES:

Convertible notes
Contracts liability
Liability for employee rights upon retirement
Operating lease liabilities
Other long term liabilities

Total long term liabilities
Total liabilities

COMMITMENTS (Note 6)

CAPITAL DEFICIENCY

Common Stock, $0.001 par value: Authorized - as of December 31, 2018 and 2019, 25,000,000 shares and
120,000,000 respectively; issued and outstanding, respectively - as of December 31, 2018 and 2019,
14,838,213 shares

Additional paid-in capital
Accumulated deficit

Total capital deficiency
Total liabilities net of capital deficiency

December 31,

2018

2019

37,808 $
4,729
1,877
8,569
52,983 $

1,758 $
6,390
-
61,131 $

5,211 $
10,274
-
9,868
-
25,353 $

47,966 $
33,027
2,374
-
5,292
88,659 $
114,012 $

17,792
4,700
1,832
8,155
32,479

1,963
5,273
5,677
45,392

6,495
11,905
1,139
16,335
4,301
40,175

50,957
16,980
2,565
4,528
509
75,539
115,714

15
269,657
(322,553)
(52,881)
61,131 $

15
270,492
(340,829)
(70,322)
45,392

$
$

The accompanying notes are an integral part of the consolidated financial statements.

F-4

PROTALIX BIOTHERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share amounts)

REVENUES FROM SELLING GOODS
REVENUES FROM LICENSE AND R&D SERVICES
TOTAL REVENUE
COST OF GOODS SOLD
RESEARCH AND DEVELOPMENT EXPENSES

Less – grants

RESEARCH AND DEVELOPMENT EXPENSES, NET
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
OPERATING LOSS
FINANCIAL EXPENSES
FINANCIAL INCOME
LOSS FROM CHANGE IN FAIR VALUE OF CONVERTIBLE NOTES

EMBEDDED DERIVATIVE

LOSS ON EXTINGUISHMENT OF CONVERTIBLE NOTES
FINANCIAL EXPENSES – NET
NET LOSS FOR THE YEAR
NET LOSS PER SHARE OF COMMON STOCK - BASIC AND DILUTED
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK USED IN

$
$

Year Ended December 31,
2018

2017

2019

19,242 $
1,836
21,078
(15,231)
(32,170 )
3,336
(28,834)
(11,530)
(34,517)
(9,725)
188

(38,061)
(1,325)
(48,923)
(83,440) $
(6.37) $

8,978 $
25,262
34,240
(9,302)
(35,534 )
2,204
(33,330)
(10,916)
(19,308)
(7,685)
536

-
-
(7,149)
(26,457) $
(1.80) $

15,866
38,827
54,693
(10,895)
(44,693)
77
(44,616)
(9,899)
(10,717)
(7,966)
407

-
-
(7,559)
(18,276)
(1.23)

COMPUTING LOSS PER SHARE – BASIC AND DILUTED

13,108,596

14,713,518

14,838,213

The accompanying notes are an integral part of the consolidated financial statements.

F-5

PROTALIX BIOTHERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL DEFICIENCY
(U.S. dollars in thousands)

Balance at January 1, 2017
Changes during 2017:
Share-based compensation related to stock options
Reclassification of embedded derivative
Convertible note conversions
Equity component of convertible notes
Net loss
Balance at December 31, 2017
Changes during 2018:
Share-based compensation related to stock options
Share-based compensation related to restricted stock award
Convertible note conversions
Convertible note payment
Net loss
Balance at December 31, 2018
Changes during 2019:
Share-based compensation related to stock options
Net loss
Balance at December 31, 2019
* Represents an amount less than $1.

Common Common

Stock
Number of
Shares

Stock

Additional

Paid–In Accumulated
Capital

Deficit

Total

Amount

12,413,409 $

12 $

202,687 $

(212,656) $

(9,957)

1,959,471

337
43,634
18,652
1,315

14,372,880 $

14 $

266,625 $

(83,440)
(296,096) $

2,990
200,997
261,346

*
*
1

498
16
1,369
1,149

14,838,213 $

15 $

269,657 $

835

14,838,213 $

15 $

270,492 $

(26,457)
(322,553) $

(18,276)
(340,829) $

337
43,634
18,654
1,315
(83,440)
(29,457)

498
16
1,369
1,150
(26,457)
(52,881)

835
(18,276)
(70,322)

The accompanying notes are an integral part of the consolidated financial statements.

F-6

PROTALIX BIOTHERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss
Adjustments required to reconcile net loss to net cash used in operating activities:
Share based compensation
Depreciation
Financial expenses (income), net (mainly exchange differences)
Changes in accrued liability for employee rights upon retirement
Gain on amounts funded in respect of employee rights upon retirement
Loss on sale of fixed assets
Loss on extinguishment of convertible notes
Net loss (income) in connection with conversion of convertible notes
Change in fair value of convertible notes embedded derivative
Amortization of debt issuance costs and debt discount
Issuance of shares for interest payment in connection with conversions of convertible

notes

Changes in operating assets and liabilities:

Increase (decrease) in contracts liability (including non-current portion)
Decrease (increase) in accounts receivable and other assets
Changes in right of use assets
Decrease (increase) in inventories
Increase (decrease) in accounts payable and accruals

Increase (decrease) in other long term liabilities
Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment
Proceeds from sale of property and equipment
Decrease (increase) in restricted deposit
Amounts funded in respect of employee rights upon retirement, net
Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:
Net payment for convertible notes
Net proceeds from issuance of convertible notes
Net cash used in financing activities
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH

EQUIVALENTS

NET DECREASE IN CASH AND CASH EQUIVALENTS
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF YEAR

2017

Year Ended December 31,
2018

2019

(83,440) $

(26,457) $

(18,276)

337
1,920
(40)
(18)
(21)
6
1,325
(116)
38,061
2,334

2,391

24,178
25

(2,588)
4,902
750
(9,994) $

(971) $
3
(146)
(5)
(1,119) $

(10,961) $
9,542
(1,419) $

414 $

(12,118)
63,281
51,163 $

514
1,671
20
(18)
(46)

213

2,602

234

17,880
(3,099)

(736)
(761)
241
(7,742) $

(686) $

62
33
(591) $

(4,752)

(270) $

(13,355)
51,163
37,808 $

835
1,617
378
(10)
(58)

2,991

(9,580)
188
(110)
414
2,735
(482)
(19,358)

(627)

(259)
3
(883)

225
(20,016)
37,808
17,792

The accompanying notes are an integral part of the consolidated financial statements.

F-7

PROTALIX BIOTHERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)

(CONTINUED)

SUPPLEMENTARY INFORMATION ON INVESTING AND FINANCING

ACTIVITIES NOT INVOLVING CASH FLOWS:
Purchase of property and equipment
Convertible note conversions
Right of use assets obtained in exchange for new operating lease liabilities

Year Ended December 31,
2018

2017

2019

$
$

526 $
16,263 $

225 $
2,285
$

388

SUPPLEMENTARY DISCLOSURE ON CASH FLOWS

Interest paid

4,854 $

4,585 $

4,344

The accompanying notes are an integral part of the consolidated financial statements.

F-8

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

a. General

Protalix BioTherapeutics, Inc. (collectively with its subsidiaries, the “Company”) and its wholly-owned subsidiaries, Protalix Ltd. and
Protalix B.V. (the “Subsidiaries”), are biopharmaceutical companies focused on the development and commercialization of recombinant
therapeutic proteins based on the Company’s proprietary ProCellEx® protein expression system (“ProCellEx”). To date, the Company has
successfully developed taliglucerase alfa (marketed under the name BioManguinhos alfataliglicerase in Brazil and certain other Latin
American countries and Elelyso® in the rest of the territories) for the treatment of Gaucher disease that has been approved for marketing in
the United States, Brazil, Israel and other markets. The Company has a number of product candidates in varying stages of the clinical
development process. The Company’s strategy is to develop proprietary recombinant proteins that are therapeutically superior to existing
recombinant proteins currently marketed for the same indications.

The Company’s product pipeline currently includes, among other candidates:

(1) pegunigalsidase alfa, or PRX-102, a therapeutic protein candidate for the treatment of Fabry disease, a rare, genetic lysosomal disorder;

(2) alidornase alfa, or PRX-110, a proprietary plant cell recombinant human Deoxyribonuclease 1, or DNase; and

(3) OPRX-106, the Company’s oral anti-TNF product candidate which is being developed as an orally-delivered anti-inflammatory treatment
using plant cells as a natural capsule for the expressed protein.

The Company, together with its commercialization partner for PRX-102, Chiesi Farmaceutici S.p.A. (“Chiesi”), plans to file a biologics
license application (“BLA”) for PRX-102 for the treatment of Fabry disease by April 2020 through the Accelerated Approval pathway of the
U.S. Food and Drug Administration (“FDA”). This decision is the result of a series of meetings and correspondence between the Company
and Chiesi, on the one hand, and the FDA, on the other hand. The Company and Chiesi have initiated preparations for the BLA submission
based on clinical data generated in the one-year completed phase I/II clinical trials of PRX-102 and from the ongoing phase III BRIDGE
clinical trial, as well as safety data from all on-going studies. The BLA will also include extensive data from the Company’s completed
nonclinical program, as well as information regarding production of PRX-102.

Obtaining marketing approval with respect to any product candidate in any country is dependent on the Company’s ability to implement the
necessary regulatory steps required to obtain such approvals. The Company cannot reasonably predict the outcome of these activities.

On October 19, 2017, Protalix Ltd. and Chiesi entered into an Exclusive License and Supply Agreement (the “Chiesi Ex-US Agreement”)
pursuant to which Chiesi was granted an exclusive license for all markets outside of the United States to commercialize pegunigalsidase alfa.
On July 23, 2018, Protalix Ltd. entered into an Exclusive License and Supply Agreement with Chiesi (the “Chiesi US Agreement”) with
respect to the commercialization of pegunigalsidase alfa in the United States.

Under each of the Chiesi Ex-US Agreement and the Chiesi US Agreement (collectively, the “Chiesi Agreements”), Chiesi made an upfront
payment to Protalix Ltd. of $25.0 million in connection with the execution of each agreement. In addition, under the Chiesi Ex-US
Agreement, Protalix Ltd. is entitled to additional payments of up to $25.0 million in pegunigalsidase alfa development costs, capped at
$10.0 million per year, and to receive additional payments of up to $320.0 million, in the aggregate, in regulatory and commercial milestone
payments. Under the Chiesi US Agreement, Protalix Ltd. is entitled to payments of up to a maximum of $20.0 million to cover development
costs for pegunigalsidase alfa, subject to a maximum of $7.5 million per year, and to receive additional payments of up to a maximum of
$760.0 million, in the aggregate, in regulatory and commercial milestone payments.

F-9

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Under the terms of both of the Chiesi Agreements, Protalix Ltd. will manufacture all of the pegunigalsidase alfa needed under the agreements,
subject to certain exceptions, and Chiesi will purchase pegunigalsidase alfa from Protalix, subject to certain terms and conditions. Under the
Chiesi Ex-US Agreement, Chiesi is required to make tiered payments of 15% to 35% of its net sales, depending on the amount of annual sales
outside of the United States, as consideration for product supply. Under the Chiesi US Agreement, Chiesi is required to make tiered payments
of 15% to 40% of its net sales, depending on the amount of annual sales in the United States, as consideration for product supply.

Since its approval by the FDA, taliglucerase alfa has been marketed by Pfizer Inc. (“Pfizer”) in accordance with the exclusive license and
supply agreement entered into between Protalix Ltd. and Pfizer, which is referred to herein as the Pfizer Agreement. In October 2015, Protalix
Ltd. and Pfizer entered into an amended exclusive license and supply agreement, which is referred to herein as the Amended Pfizer
Agreement, pursuant to which the Company sold to Pfizer its share in the collaboration created under the Pfizer Agreement for the
commercialization of Elelyso. As part of the sale, the Company agreed to transfer its rights to Elelyso in Israel to Pfizer while gaining full
rights to it in Brazil. Under the Amended Pfizer Agreement, Pfizer is entitled to all of the revenues, and is responsible for 100% of expenses
globally for Elelyso, excluding Brazil where the Company is responsible for all expenses and retains all revenues.

On June 18, 2013, the Company entered into a Supply and Technology Transfer Agreement (the “Brazil Agreement”) with Fundação Oswaldo
Cruz (“Fiocruz”), an arm of the Brazilian Ministry of Health (the “Brazilian MoH”), for taliglucerase alfa. Fiocruz’s purchases of
BioManguinhos alfataliglicerase to date have been significantly below certain agreed upon purchase milestones and, accordingly, the
Company has the right to terminate the Brazil Agreement. Notwithstanding the termination right, the Company is, at this time, continuing to
supply BioManguinhos alfataliglicerase to Fiocruz under the Brazil Agreement, and patients continue to be treated with BioManguinhos
alfataliglicerase in Brazil.

F-10

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

b. Basis of presentation

The Company’s financial statements have been prepared in accordance with generally accepted accounting principles in the United States
(“U.S. GAAP”).

c. Use of estimates in the preparation of financial statements

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

d. Functional currency

The dollar is the currency of the primary economic environment in which the operations of the Company and its Subsidiaries are conducted.
The Company’s revenues are derived in dollars. Most of the Company’s expenses and capital expenditures are incurred in dollars, and the
major source of the Company’s financing has been provided in dollars.

Transactions and balances originally denominated in dollars are presented at their original amounts. Balances in non-dollar currencies are
translated into dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. For non-dollar
transactions and other items (stated below) reflected in the statements of operations, the following exchange rates are used: (i) for transactions
– exchange rates at the transaction dates or average rates; and (ii) for other items (derived from non-monetary balance sheet items such as
depreciation and amortization, etc.) – historical exchange rates. Currency transaction gains and losses are recorded as financial income or
expenses, as appropriate.

e. Cash equivalents

The Company considers all short-term, highly liquid investments, which include short-term bank deposits with original maturities of three
months or less from the date of purchase, that are not restricted as to withdrawal or use and are readily convertible to known amounts of cash,
to be cash equivalents.

Inventories

Inventories are valued at the lower of cost or net realizable value. Cost of raw and packaging materials and purchased products is determined
using the “moving average” basis.

Cost of finished products is determined as follows: the value of the raw and packaging materials component is determined primarily using the
“moving average” basis; the value of the labor and overhead component is determined on an average basis over the production period.

Inventory is written down for estimated obsolescence based upon management assumptions about future demand and market conditions.

g. Property and equipment

1. Property and equipment are stated at cost, net of accumulated depreciation and amortization.

2. The Company’s assets are depreciated by the straight-line method on the basis of their estimated useful lives as follows:

Laboratory equipment
Furniture
Computer equipment

F-11

Years
5
10-15
3

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Leasehold improvements are amortized by the straight-line method over the expected lease term, which is shorter than the estimated useful
life of the improvements.

Impairment in value of long-lived assets

The Company tests long-lived assets for impairment if an indication of impairment exists. If the sum of expected future cash flows of definite
life assets (undiscounted and without interest charges) is less than the carrying amount of such assets, the Company recognizes an impairment
loss, and writes down the assets to their estimated fair values.

Income taxes

1. Deferred income taxes

Deferred taxes are determined utilizing the assets and liabilities method based on the estimated future tax effects of the differences
between the financial accounting and tax bases of assets and liabilities under the applicable tax laws. Deferred tax balances are computed
using the tax rates expected to be in effect when those differences reverse. A valuation allowance in respect of deferred tax assets is
provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be
realized. The Company has provided a full valuation allowance with respect to its deferred tax assets. The Company used statutory tax
rates of 27% and 23%. See note 12.

2. Uncertainty in income taxes

Tax benefits recognized in the financial statements are those that the Company’s management deems at least more likely than not to be
sustained, based on technical merits. The amount of benefits recorded for these tax benefits is measured as the largest benefit the
Company’s management deems more likely than not to be sustained.

j. Revenue Recognition

On January 1, 2018, the Company adopted the new accounting standard, ASC 606, Revenue from Contracts with Customers, and all the
related amendments, using the modified retrospective method. The implementation of this Accounting Standards Update (ASU) did not have
a material impact on the Company’s consolidated financial statements at adoption.

The Company’s revenue recognition accounting policy from January 1, 2018, following the adoption of the new revenue standard

A contract with a customer exists only when: the parties to the contract have approved it and are committed to perform their respective
obligations, the Company can identify each party’s rights regarding the distinct goods or services to be transferred (“performance
obligations”), the Company can determine the transaction price for the goods or services to be transferred, the contract has commercial
substance and it is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods or services
that will be transferred to the customer.

Revenues are recorded in the amount of consideration to which the Company expects to be entitled in exchange for performance obligations
upon transfer of control to the customer.

1. Revenues from selling products

The Company recognizes revenues from selling goods at a point in time when control over the product is transferred to customers (upon
delivery).

F-12

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

2. Revenues from Chiesi Agreements

According to ASC 606, a performance obligation is a promise to provide a distinct good or service or a series of distinct goods or
services. Goods and services that are not distinct are bundled with other goods or services in the contract until a bundle of goods or
services that is distinct is created. A good or service promised to a customer is distinct if the customer can benefit from the good or
service either on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the
good or service to the customer is separately identifiable from other promises in the contract.

The Company has identified two performance obligation in Chiesi agreements as follows: (1) the license and research and development
services and (2) contingent performance obligation regarding future manufacturing.

The Company determined that the license together with the research and development services should be combined into single
performance obligation since Chiesi cannot benefit from the license without the research and development services. The research and
development services are highly specialized and are dependent on the supply of the drug.

The future manufacturing is contingent on regulatory approvals of the drug and Company deems these services to be separately
identifiable from other performance obligations in the contract. Manufacturing services post-regulatory approval are not interdependent
or interrelated with the license and research and development services.

The transaction price was comprised of fixed consideration and variable consideration (capped research and development
reimbursements). Under ASC 606, the consideration to which the Company would be entitled upon the achievement of contractual
milestones, which are contingent upon the occurrence of future events, are a form of variable consideration. The Company estimates
variable consideration using the most likely method. Amounts included in the transaction price are recognized only when it is probable
that a significant reversal of cumulative revenues will not occur. Prior to recognizing revenue from variable consideration, the Company
uses significant judgment to determine the probability of significant reversal of such revenue.

Since the customer benefits from the research and development services as the entity performs the service, revenue from granting the
license and the research and development services is recognized over time using the cost-to-cost method. The Company used significant
judgment when it determined the costs expected to be incurred upon satisfying the identified performance obligation.

Revenue from additional research and development services ordered by Chiesi, is recognized over time using the cost-to-cost method.

The Company accounted for the Chiesi US agreement as a modification of the Chiesi Ex-US agreement. As such, the Company recorded
revenue through a cumulative catch-up adjustment in the third quarter of 2018 in the amount of $6.2 million.

The Company’s revenue recognition accounting policy prior to January 1, 2018, was materially the same.

k. Research and development costs

Research and development costs are expensed as incurred and consist primarily of personnel, subcontractors and consultants (mainly in
connection with clinical trials), facilities, equipment and supplies for research and development activities. Grants received by the Israeli
Subsidiary from the National Authority for Technological Innovation (“NATI”), which has replaced many of the functions of the Office of the
Chief Scientist of Israel’s Ministry of Industry, Trade and Labor (the “OCS”), are recognized when the grant becomes receivable, provided
there is reasonable assurance that the Company or the Subsidiaries will comply with the conditions attached to the grant and there is
reasonable assurance the grant will be received. The grant is deducted from the research and development expenses as the applicable costs are
incurred. In connection with purchases of assets, amounts assigned to intangible assets to be used in a particular research and development
project that have no alternative future use are charged to research and development costs at the purchase date. Cost of research and
development services are included in research and development expenses.

F-13

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

l. Concentration of credit risks and trade receivable

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of bank deposits. The Company
deposits these instruments with highly rated financial institutions, mainly in Israeli banks, and, as a matter of policy, limits the amounts of
credit exposure to any one financial institution.

The Company has not experienced any credit losses in these accounts and does not believe it is exposed to any significant credit risk on these
instruments. The Company’s trade receivables represent amounts to be received from Pfizer, Brazil and Chiesi. The Company does not
require Pfizer, Brazil or Chiesi to post collateral with respect to receivables.

m. Share-based compensation

The Company accounts for employee’s share-based payment awards classified as equity awards using the grant-date fair value method. The
fair value of share-based payment transactions is recognized as an expense over the requisite service period.

The Company elected to recognize compensation cost for an award with only service conditions that has a graded vesting schedule using the
accelerated method based on the multiple-option award approach.

When stock options are granted as consideration for services provided by consultants and other non-employees, the grant is accounted for
based on the fair value of the stock options issued. Options granted are recognized over the related service period using the straight-line
method.

The Company elects to account for forfeitures as they occur.

n. Net loss per share

Basic and diluted loss per share (“LPS”) are computed by dividing net loss by the weighted average number of shares of the Company’s
Common Stock, par value $0.001 per share (the “Common Stock”) outstanding for each period. The calculation of diluted LPS does not
include approximately 7,684,820, 7,458,380 and 7,838,120 shares of Common Stock underlying outstanding options, restricted shares of
Common Stock and shares issuable upon conversion of the convertible notes for the fiscal years ended December 31, 2017, 2018 and 2019,
respectively, because the effect would be anti-dilutive. The computation of basic and diluted net loss per common share was adjusted
retroactively for all periods presented to reflect the Company’s reverse stock split. See also note 9(b).

o. Convertible notes

All outstanding convertible notes are accounted for using the guidance set forth in the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (ASC) 815 requiring that the Company determine whether the embedded conversion option must be
separated and accounted for separately. ASC 470-20 regarding debt with conversion and other options requires the issuer of a convertible debt
instrument that may be settled in cash upon conversion to separately account for the liability (debt) and equity (conversion option)
components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The Company accounted for the 2018
Notes (as defined in note 10a) as a liability, on an aggregated basis, in their entirety. The 2021 Notes were accounted for partially as liability
and equity components of the instrument and partially as a debt host contract with an embedded derivative resulting from the conversion
feature. During the year ended December 31, 2017, the embedded derivative was reclassified to additional paid in capital.

F-14

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Issuance costs regarding the issuance of the 2021 Notes are amortized using the effective interest rate. The debt discount and debt issuance
costs regarding the issuance of the 2018 Notes were deferred and amortized over the 2018 Notes period (5 years).

As of December 31, 2019, a total of $57.9 million aggregate principal amount of the 2021 Notes were outstanding. In addition, as of
December 31, 2019, none of the 2018 Notes were outstanding.

p. Leases

Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income
statement. The Company determines if an arrangement is a lease at inception. Lease classification is governed by five criteria in ASC 842-10-
25-2. If any of these five criteria is met, the Company classifies the lease as a finance lease. Otherwise, the Company classifies the lease as an
operating lease.

Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities and operating lease liabilities in the
consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s
obligation to make lease payments arising from the lease. Operating and finance lease ROU assets and liabilities are recognized at the
commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate
based on the information available at the commencement date to determine the present value of the lease payments. The Company’s
incremental average borrowing rate at inception was 12.58%.

The Company elected the package of transition practical expedients permitted under the transition guidance within the new standard which,
among other things, allows the Company to carryforward the historical lease classification.

The new lease standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease
recognition exemption for all leases with a term shorter than 12 months. This means, for those leases, the Company does not recognize ROU
assets or lease liabilities, including not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition.
The Company also elected the practical expedient to not separate lease and non-lease components for all of the Company’s leases, other than
leases of real estate.

Lease terms will include options to extend or terminate the lease when it is reasonably certain that the Company will either exercise or not
exercise the option to renew or terminate the lease. The Company recognizes lease expenses over the lease term on a straight line basis.

The depreciable life of leasehold improvements is limited by the expected lease term, unless there is a transfer of title or a purchase option for
the leased asset reasonably certain of exercise.

Additionally, following the adoption of the new lease standard and in subsequent measurements, the Company applies the portfolio approach
to account for the operating lease ROU assets and liabilities for certain car leases and incremental borrowing rates.

q. Recently adopted standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, “Leases” (Topic 842). The guidance
establishes an ROU model that requires a lessee to recognize an ROU asset and lease liability on the balance sheet for all leases. The
Company adopted the new lease standard and all the related amendments on January 1, 2019 and used the effective date as the Company’s
date of initial application. Consequently, financial information was not updated and the disclosures required under the new standard are not
provided for dates and periods before January 1, 2019. A modified retrospective transition approach is required, applying the new standard to
all leases existing at the date of initial application. As of the adoption date, the Company recognized an operating lease asset and a liability of
$5.9 million and $5.7 million, respectively, as of January 1, 2019 on its balance sheet.

F-15

NOTE 2 - COMMERCIALIZATION AGREEMENTS

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. On November 30, 2009, Protalix Ltd. and Pfizer entered into the Pfizer Agreement (as amended in June 2013) pursuant to which Pfizer
was granted an exclusive, worldwide license to develop and commercialize taliglucerase alfa, except for Israel and Brazil. Under the
Pfizer Agreement Protalix was entitled to 40% of the results (profits or losses) earned on Pfizer’s sales of taliglucerase alfa.

In October 2015, the Company entered into the Amended Pfizer Agreement with Pfizer. Pursuant to the amendment, the Company
granted Pfizer an exclusive license in the entire world, including Israel but excluding Brazil. Pfizer acquired all the information,
knowledge and permission to manufacture and sell Elelyso.

Protalix Ltd. also agreed to provide Pfizer with:

a. Manufacturing and supply of the drug substance for its incorporation into the licensed product in consideration of an agreed price

per unit.

b. Assistance in arranging for the manufacture of the drug substance by Pfizer or by alternative supplier chosen by Pfizer in

consideration of an agreed hourly rate plus reimbursement of expenses.

Promissory note – as of the date of the amendment, the Company owed Pfizer $4.3 million as a result of the accumulated losses incurred
by the Collaboration Operation. Following the new agreements, the Company committed to pay Pfizer the principal sum of the debt at the
earlier of (a) November 12, 2020 and (b) the date upon which it becomes due pursuant to any event of default, as defined. As of
December 31, 2018, the promissory note was presented in “other long term liabilities.” As of December 31, 2019, the promissory note
was classified to current liabilities.

In October 2017, Protalix Ltd. entered into the Chiesi Ex-U.S. Agreement with respect to the commercialization of pegunigalsidase alfa
(hereafter – the drug) for the treatment of Fabry disease. Under the terms of the Chiesi Agreement, Protalix Ltd. granted to Chiesi
exclusive licensing rights for the commercialization of the drug for all markets outside of the United States. At the effective date, Protalix
Ltd. had maintained the exclusive commercialization rights to the drug in the United States, which rights were subsequently granted to
Chiesi in July 2018.

Protalix Ltd. will be mainly responsible for (i) continuing the development of the drug until a regulatory approval is granted and (ii)
manufacture and supply the drug to Chiesi, based on Chiesi’s requests.

The consideration consists of the following:

a. Upfront, non-refundable payment of $25.0 million.

b. Additional payments of up to $25.0 million in development costs, capped at $10.0 million per year.

c. Payments for additional studies, as may be approved from time to time by Chiesi.

d. Milestone payments of up to $320.0 million with respect to certain regulatory and commercial events as defined in the Chiesi

Agreement.

e. Additional payments as consideration for the supply of the drug. The payment will vary from 15% to 35% of Chiesi’s average selling

price of the drug, depending on the amount of annual sales.

Protalix Ltd. will be the sole manufacturer of the drug.

Chiesi does not have sublicensing rights (except for certain territories).

F-16

NOTE 2 - COMMERCIALIZATION AGREEMENTS (continued):

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In July 2018, Protalix Ltd. entered into the Chiesi U.S. Agreement with respect to the commercialization of the drug for the treatment of
Fabry disease. Under the terms of the Chiesi U.S. Agreement, Protalix Ltd. granted to Chiesi exclusive licensing rights for the
commercialization of the drug for all markets in the United States. Protalix Ltd. will be mainly responsible for (i) continuing the
development of the drug until a regulatory approval is granted, (ii) continuing certain clinical development efforts in relation to the drug
after a regulatory approval is granted and (iii) manufacture and supply the drug to Chiesi, based on Chiesi’s requests.

The consideration consists of the following:

a. Upfront, non-refundable payment of $25.0 million.

b. Additional payments of up to $20.0 million in development costs, capped at $7.5 million per year.

c. Payments for additional studies, as may be approved from time to time by Chiesi.

d. Milestone payments of up to $760.0 million with respect to certain regulatory and commercial events as defined in the Chiesi

Agreement.

e. Additional payments as consideration for the supply of the drug. The payment will vary from 15% to 40% of Chiesi’s average selling

price of the drug, depending on the amount of annual sales.

Protalix will be the sole manufacturer of the drug.

Chiesi does not have sublicensing rights.

As of December 31, 2019, the Company has received, or is entitled to receive, the following payments from Chiesi:

a. Upfront payments equal to $50.0 million, in the aggregate.

b. Payments equal to approximately $40.1 million in consideration for development services performed.

c. Payments equal to approximately $9.1 million in connection with the performance of extension studies.

During the last quarter of 2019, the Company recognized revenues of approximately $4.5 million related to a $10.0 million future
milestone payment. The Company assessed the likelihood of achieving the milestone using the most likely amount method and evaluated
for the constraint by including in the transaction price variable consideration to the extent that it is probable that a significant reversal in
the amount of cumulative revenue recognized will not occur. Based on the Company’s judgement, the milestone payment is expected to
be received in the beginning of 2021.

3. On June 18, 2013, Protalix Ltd. entered into the Brazil Agreement with Fiocruz for BioManguinhos alfataliglicerase. Fiocruz’s purchases

of BioManguinhos alfataliglicerase to date have been significantly below certain agreed upon purchase milestones and, accordingly, the
Company has the right to terminate the Brazil Agreement. Notwithstanding, the Company is, at this time, continuing to supply
BioManguinhos alfataliglicerase to Fiocruz under the Brazil Agreement, and patients continue to be treated with BioManguinhos
alfataliglicerase in Brazil. Approximately 25% of adult Gaucher patients in Brazil are currently treated with BioManguinhos
alfataliglicerase. The Company is discussing with Fiocruz potential actions that Fiocruz may take to comply with its purchase obligations
and, based on such discussions, the Company will determine what it believes to be the course of action that is in the best interest of the
Company.

NOTE 3 - PROPERTY AND EQUIPMENT

a. Composition of property and equipment grouped by major classifications is as follows:

(U.S. dollars in thousands)
Laboratory equipment
Furniture and computer equipment
Leasehold improvements
Equipment under construction

Less – accumulated depreciation and amortization

F-17

December 31,

2018

2019

16,732 $
2,565
16,191
18
35,506 $
(29,116)
6,390 $

16,849
2,636
16,492

35,977
(30,704)
5,273

NOTE 3 - PROPERTY AND EQUIPMENT (continued):

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

b. Depreciation in respect of property and equipment totaled approximately $1.9 million, $1.7 million and $1.6 million for the years ended

December 31, 2017, 2018 and 2019, respectively.

NOTE 4 - INVENTORIES

Inventories at December 31, 2018 and 2019 consisted of the following:

(U.S. dollars in thousands)
Raw materials
Work in progress
Finished goods

December 31,

2018

2019

3,792 $

4,777
8,569 $

3,607
552
3,996
8,155

b. During the years ended December 31, 2018 and 2019, the Company recorded approximately $1.1 million and $0.5 million, respectively, for

write-down of inventory under cost of goods sold.

NOTE 5 - LIABILITY FOR EMPLOYEE RIGHTS UPON RETIREMENT

The Israeli Subsidiary is required to make a severance payment upon dismissal of an employee or upon termination of employment in certain
circumstances. The severance pay liability to the employees (based upon length of service and the latest monthly salary - one month’s salary for
each year employed) is recorded on the Company’s balance sheets under “Liability for employee rights upon retirement.” The liability is recorded
as if it were payable at each balance sheet date on an undiscounted basis.

The liability is funded in part from the purchase of insurance policies or by the establishment of pension funds with dedicated deposits in the
funds. The amounts used to fund these liabilities are included in the Company’s balance sheets under “Funds in respect of employee rights upon
retirement.” These policies are the Company’s assets. However, under labor agreements and subject to certain limitations, any policy may be
transferred to the ownership of the individual employee for whose benefit the funds were deposited. In the years ended December 31, 2017, 2018
and 2019, the Company deposited approximately $166,000, $145,000 and $143,000, respectively, with insurance companies in connection with its
severance payment obligations.

In accordance with the current employment agreements with certain employees, the Company makes regular deposits with certain insurance
companies for accounts controlled by each applicable employee in order to secure the employee’s rights upon retirement. The Company is fully
relieved from any severance pay liability with respect to each such employee after it makes the payments on behalf of the employee. The liability
accrued in respect of these employees and the amounts funded, as of the respective agreement dates, are not reflected in the Company’s balance
sheets, as the amounts funded are not under the control and management of the Company and the pension or severance pay risks have been
irrevocably transferred to the applicable insurance companies (the “Contribution Plans”).

The amounts of severance pay expenses were approximately $906,000, $781,000 and $784,000 for each of the years ended December 31, 2017,
2018 and 2019, respectively, of which approximately $746,000, $620,000 and $642,000 in the years ended December 31, 2017, 2018 and 2019,
respectively, were in respect of the Contribution Plans. Gain on amounts funded in respect of employee rights upon retirement totaled
approximately $21,000, $46,000 and $58,000 for the years ended December 31, 2017, 2018 and 2019, respectively.

The Company expects to contribute approximately $866,000 in the year ending December 31, 2020 to insurance companies in connection with its
severance liabilities for its operations for that year, approximately $722,000 of which will be contributed to one or more Contribution Plans.

During the five-year period following December 31, 2019, the Company expects to pay future benefits to three employees upon each such
employee’s normal retirement age. The Company anticipates that the benefits payable will be approximately $246,000.

F-18

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - COMMITMENTS

a. Royalty Commitments

The Company is obligated to pay royalties to NATI on proceeds from the sale of products developed from research and development activities
that were funded, partially, by grants from NATI or its predecessor, the Office of the Israeli Innovation Authority (IIA). At the time the grants
were received, successful development of the related projects was not assured.

In the case of failure of a project that was partly financed as described above, the Company is not obligated to pay any such royalties or repay
funding received from NATI or the IIA.

Under the terms of the applicable funding arrangements, royalties of 3% to 6% are payable on the sale of products developed from projects
funded by NATI or the IIA, which payments shall not exceed, in the aggregate, 100% of the amount of the grant received (dollar linked), plus,
commencing upon January 1, 2001, interest at an annual rate based on LIBOR. In addition, if the Company receives approval to manufacture
products developed with government grants outside the State of Israel, it will be required to pay an increased total amount of royalties
(possibly up to 300% of the grant amounts plus interest), depending on the manufacturing volume that is performed outside the State of Israel,
and, possibly, an increased royalty rate.

Royalty expenses to NATI or the IIA are included in the statement of operations as a component of the cost of revenues and were
approximately $1,384,000, $1,619,000 and $1,390,000 during the years ended December 31, 2017, 2018 and 2019, respectively.

At December 31, 2018 and 2019, the maximum total royalty amount payable by the Company under these funding arrangements is
approximately $41.9 million and $40.8 million, respectively (without interest, assuming 100% of the funds are payable).

b. Subcontracting Agreements

The Company has entered into sub-contracting agreements with several clinical providers and consultants in Israel, the United States and
certain other countries in connection with its primary product development process. As of December 31, 2019, total commitments under said
agreements were approximately $9.8 million.

NOTE 7 - OPERATING LEASES

The Company is a party to a number of lease agreements for its facilities, the latest of which has been extended until 2021. The Company has the
option to extend certain of such agreements on two additional occasions for additional five-year periods each, for a total of 10 additional years.
During the extended lease period, the aggregate monthly rental payments will increase by 7.5%-10% for each option. The Company expects to
exercise these options in future periods. As of December 31, 2019, the Company provided bank guarantees of approximately $439,000, in the
aggregate, to secure the fulfillment of its obligations under the lease agreements. As of December 31, 2018, the future minimum lease payments
required under the operating leases for such premises are approximately $758,000, $758,000 and $621,000, for fiscal years 2019 through 2021,
respectively.

The Company entered into several three-year leases for vehicles which are regularly amended as new vehicles are leased. As of December 31,
2018, the future minimum lease payments for the years ending December 31, 2019, 2020 and 2021 are approximately $474,000, $333,000 and
$82,000, respectively.

F-19

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – OPERATING LEASES (continued):

The following table sets forth data regarding the Company’s operating leases for the year ended December 31, 2019:

(U.S. dollars in thousands)
Operating lease costs
Cash paid for amounts included in the measurement of lease liabilities
Weighted average remaining lease term (in years)
Weighted average discount rate

December
31, 2019
1,219
1,329
10.508

12.7%

The following table sets forth a maturity analysis of the Company’s operating lease liabilities as of December 31, 2019:

(U.S. dollars in thousands)
2020
2021
2022
2023
After 2024
Total undiscounted cash flows
Less: imputed interest
Present value of operating lease liabilities

December
31, 2019
1,139
956
845
806
6,683
10,429
4,762
5,667

$
$
$
$
$
$
$
$

NOTE 8 - REVENUE

The following table summarizes the Company’s disaggregation of revenues:

(U.S. dollars in thousands)
Pfizer
Brazil
Revenues from selling goods
Revenues from license and R&D services

Year ended December 31,
2018

2017

2019

$
$
$
$

12,181 $
7,061 $
19,242 $
1,836 $

5,320
3,658
8,978
25,262

6,722
9,144
15,866
38,827

During the last quarter of 2019, the Company recognized revenues of approximately $4.5 million related to a $10.0 million future milestone
payment. The Company assessed the likelihood of achieving the milestone using the most likely amount method and evaluated for the constraint
by including in the transaction price variable consideration to the extent that it is probable that a significant reversal in the amount of cumulative
revenue recognized will not occur. Based on the Company’s judgement, the milestone payment is expected to be received in the beginning of
2021.

NOTE 9 - SHARE CAPITAL

a. Rights of the Company’s Common Stock

The Company’s Common Stock is listed on the NYSE American and on the Tel Aviv Stock Exchange. Each share of Common Stock is
entitled to one vote. The holders of shares of Common Stock are also entitled to receive dividends whenever funds are legally available, when
and if declared by the Board of Directors. Since its inception, the Company has not declared any dividends.

F-20

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – SHARE CAPITAL (continued):

b. Reverse stock split

On December 9, 2019, the Company’s stockholders approved an amendment to the Company’s Certificate of Incorporation, as amended, to,
among other things, effect a reverse stock split at a ratio of one-for-ten. The ratio was determined by the Company’s Board of Directors on
December 5, 2019 and the reverse stock split became effective at midnight December 19, 2019. All share and per share amounts included in
the consolidated financial statements have been adjusted retrospectively to reflect the effect of the reverse stock split.

c. Stock based compensation

On December 14, 2006, the Board of Directors adopted the Protalix BioTherapeutics, Inc. 2006 Stock Incentive Plan, as amended (the
“Plan”). The Plan has since been amended to, among other things, increase the number of shares of common stock available under the Plan to
2,384,165 shares. The grant of options to Israeli employees under the Plan is subject to the terms stipulated by Sections 102 and 102A of the
Israeli Income Tax Ordinance. Each option grant made to an Israeli citizen is subject to the track chosen by the Company, either Section 102
or Section 102A of the Israeli Income Tax Ordinance, and pursuant to the terms thereof, the Company is not allowed to claim, as an expense
for tax purposes, the amounts credited to employees as a benefit, including amounts recorded as salary benefits in the Company’s accounts, in
respect of options granted to employees under the Plan, with the exception of the work-income benefit component, if any, determined on the
grant date. For Israeli non-employees, the share option plan is subject to Section 3(i) of the Israeli Income Tax Ordinance.

As of December 31, 2019, 690,182 shares of Common Stock remain available for grant under the Plan.

For purposes of determining the fair value of the options and restricted stock unit granted to employees and non-employees, the Company’s
management uses the fair value of the Common Stock.

From January 1, 2017 through December 31, 2019, the Company granted options and shares of restricted stock to certain employees and non-
employees as follows:

1. Options and restricted stock unit granted to employees:

a) Below is a table summarizing all of the options grants to employees during the year ended December 31, 2019:

No. of options granted
160,000
80,000

$
$

Exercise
price

Vesting
period

Fair value
at grant
(U.S. dollars
in
thousands)

Expiration
period

4.69
2.00

4 years $
4 years $

449
97

10 years
10 years

Set forth below are grants made by the Company to employees (including related parties) during the three-year period ended
December 31, 2019 (a portion of such grants appear in the table above):

On September 13, 2018, the Company’s compensation committee approved the grant of 10-year options to purchase, in the
aggregate, 636,000 shares of Common Stock, of which options to purchase 400,000 shares of Common Stock were granted to the
Company’s executive officers and options to purchase 236,000 shares of Common Stock were granted to other employees with an
exercise price equal to $5.60 per share and $5.10 per share, respectively, under the Plan. The options vest over a four-year period in
16 equal quarterly increments. Vesting of the options granted to the executive officers is subject to acceleration in full upon a
Corporate Transaction or a Change in Control, as those terms are defined in the Plan, and are subject to certain other terms and
conditions. The Company estimated the fair value of the options on the date of grant using the Black-Scholes option-pricing model to
be approximately $1.9 million based on the following weighted average assumptions: share price equal to $5.10; dividend yield of
0% for all years; expected volatility of 64.3%; risk-free interest rates of 2.9%; and expected life of six years.

F-21

NOTE 9 – SHARE CAPITAL (continued):

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In June 2019, the Company granted to its new chief executive officer 10-year options to purchase, in the aggregate, 160,000 shares
of Common Stock under the Plan. The options have an exercise price equal to $4.69 per share, vest over a four-year period in 16
equal quarterly increments. Vesting of the options is subject to acceleration in full upon a Corporate Transaction or a Change in
Control, as those terms are defined in the Plan, and are subject to certain other terms and conditions. The Company estimated the fair
value of the options on the date of grant using the Black-Scholes option-pricing model to be approximately $449,000 based on the
following weighted average assumptions: share price equal to $4.69; dividend yield of 0% for all years; expected volatility of 65.3%;
risk-free interest rates of 1.8%; and expected life of six years.

In September 2019, the Company granted to its new chief financial officer 10-year options to purchase, in the aggregate, 80,000
shares of Common Stock under the Plan. The options have an exercise price equal to $2.00 per share and vest over a four-year period
in 16 equal quarterly increments. Vesting of the options is subject to acceleration in full upon a Corporate Transaction or a Change in
Control, and are subject to certain other terms and conditions. The Company estimated the fair value of the options on the date of
grant using the Black-Scholes option pricing model to be approximately $97,000 based on the following weighted average
assumptions: share price equal to $2.00; dividend yield of 0% for all years; expected volatility of 66.48%; risk-free interest rates of
1.695%; and expected life of six years. In addition, contingent upon certain conditions, the new chief financial officer is entitled to a
grant of restricted stock units with an aggregate value of $100,000, on an annual basis.

b) The total unrecognized compensation cost of employee stock options at December 31, 2019 is approximately $0.8 million. The
unrecognized compensation cost of employee stock options is expected to be recognized over a weighted average period of 1.07
years.

During the three years ended December 31, 2019, no cash was received from employees as a result of employee stock option
exercises and the Company did not realize any tax benefit in connection with any exercises.

2. A summary of share option plans, and related information, under all of the Company’s equity incentive plans for the years ended

December 31, 2017, 2018 and 2019 is as follows:

a) Options granted to employees:

2017

Weighted
average
exercise
price

Number
of
options

Year ended December 31,
2018
Weighted

2019
Weighted

Number
of
options

Average
Exercise
Price

Number
of
options

average
exercise
price

488,421

36.17

472,962 $

36.04

1,000,068 $

15.47

15,459
472,962
445,746

$
$

40.04
36.04
36.96

636,000
108,894
1,000,068 $
394,486 $

5.41
46.04
15.47
30.65

240,000
199,871
1,040,197 $
532,322 $

3.79
14.14
13.03
21.04

Outstanding at beginning of year
Changes during the year:

Granted
Forfeited and Expired
Outstanding at end of year
Exercisable at end of year

F-22

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – SHARE CAPITAL (continued):

b) Options and restricted stocks granted to consultants, directors, and other service providers:

2017

Number
of
Options/
restricted
stock

Weighted
average
exercise
price

Year ended December 31,
2018

Number
of
options/
restricted
stock

Weighted
average
exercise
Price

2019

Number
of
options/
restricted
stock

Weighted
average
exercise
price

20,800

31.56

20,000

32.82

15,000

33.70

800
20,000
20,000

0.001
32.82
32.82

5,000
15,000
15,000

30.20
33.70
33.70

15,000
15,000

33.70
33.70

Outstanding at beginning of
year
Changes during the year:
Expired
Outstanding at end of year
Exercisable at end of year

c) The following tables summarize information concerning outstanding and exercisable options and restricted stock as of December 31,

2019:

Exercise
prices

$
$
$
$
$
$
$
$
$

2.00
4.69
5.10
5.60
17.20
23.70
33.70
69.00
96.60

Options outstanding

Number of
options outstanding
at end of
year

December 31, 2019

Weighted
average
remaining
contractual
life

Options exercisable

Number of
options
exercisable

Weighted
average
remaining
contractual
life

80,000
160,000
228,062
258,126
149,209
90,000
15,000
68,000
6,800
1,055,197

9.73
9.50
8.65
7.09
4.39
1.84
0.62
0.15
0.83

5,000
20,000
72,687
120,626
149,209
90,000
15,000
68,000
6,800
547,322

9.73
9.50
8.54
5.24
4.39
1.84
0.62
0.15
0.83

The following table illustrates the effect of share-based compensation on the statement of operations:

(U.S. dollars in thousands)
Research and development expenses
Selling, general and administrative expenses

b. Private and 144A Offerings

Year ended December 31,
2018

2017

2019

182 $
155
337 $

310 $
204
514 $

513
322
835

2. On July 24, 2017, the Company entered into a Note Purchase Agreement with certain institutional investors relating to the private
issuance and sale by the Company of $10.0 million in aggregate principal amount of its 2021 Notes. The 2021 Notes were issued
pursuant to the base indenture dated December 7, 2016. Concurrently, the Company exchanged with certain existing note holders
$9.0 million aggregate principal amount of the Company’s outstanding 2018 Notes for $8.55 million aggregate principal amount of
newly issued 2022 Notes (as described in note 10c). See also note 10c.

F-23

NOTE 9 – SHARE CAPITAL (continued):

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. On May 22, 2018, the Company agreed to a privately negotiated exchange with certain existing note holders to exchange $3,423,000
aggregate principal amount of the Company’s outstanding 2018 Notes for 261,363 shares of the Company’s common stock and
$2.23 million in cash to cover outstanding principal and accrued interest on the exchanged 2018 Notes. See also note 10a.

NOTE 10 - CONVERTIBLE NOTES

4.5% Convertible Notes (“2018 Notes”)

On September 18, 2013, the Company completed a private placement of $69.0 million in aggregate principal amount of Senior Convertible
Notes (the “2018 Notes”) which accrued interest at a rate of 4.50% per year. In December 2016, $54.1 million aggregate principal amount of
2018 Notes were exchanged for 2021 Notes and shares of common stock (see also note 10b) and in July 2017, $9.0 million aggregate
principal amount of 2018 Notes were exchanged for 2022 Notes as defined in note 10c (see also note 10c). On June 2018, the Company
exchanged $3.423 million aggregate principal amount of the Company’s 2018 Notes for 261,363 shares of Common Stock and approximately
$2.23 million in cash and delivered the necessary funds under the indenture governing the 2018 Notes to effectively discharge such notes,
which was $2.53 million. On September 15, 2018, the 2018 Notes matured and were paid in full.

The following table sets forth total interest expense recognized for the years ended December 31, 2017 and 2018 related to the 2018 Notes:

(U.S. dollars in thousands)
Contractual interest expense
Amortization of debt issuance costs and debt discount
Gain from early redemption
Total

b. 7.5% Convertible Notes (“2021 Notes”)

December 31,

2017

2018

501 $
71
-
572 $

139
15
(32)
122

On December 1, 2016, the Company entered into a note purchase agreement with institutional investors, which held part of the 2018 Notes
(the “2016 Purchasers”), relating to the sale by the Company of $22.5 million aggregate principal amount of 7.50% Senior Secured
Convertible Notes due 2021 in a private placement pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities
Act”). Concurrently with the consummation of the private placement of the 2021 Notes, the Company entered into a privately negotiated
exchange agreement (the “2016 Exchange Agreement”) with certain existing note holders identified therein to exchange $54.1 million
aggregate principal amount of the Company’s outstanding 2018 Notes for (i) $40.186 million aggregate principal amount of 2021 Notes, (ii)
2,384,673 shares of Common Stock and (iii) cash, equal to the accrued and unpaid interest on the 2018 Notes and any fractional shares. The
closing date of the purchase agreement and the 2016 Exchange Agreement was December 7, 2016. The issuance of the 2021 Notes and shares
in the exchange and the private placement were made in reliance on the exemption from the registration requirements of the Securities Act
pursuant to Section 4(a)(2) thereof. The net proceeds from the private placement were $19.7 million, after deducting the placement agent’s
fees and the Company’s estimated offering expenses.

In connection with the completion of the exchange and the private placement, the Company entered into the 2016 Indenture. The 2021 Notes
accrue interest at a rate of 7.50% per year, payable semiannually in arrears on May 15 and November 15 of each year, beginning on May 15,
2017. A portion of the interest payable may be made in shares of Common Stock at the Company’s election. The Notes will mature on
November 15, 2021.

On July 24, 2017, the Company entered into another note purchase agreement with certain institutional investors relating to the private
issuance and sale by the Company of $10.0 million in aggregate principal amount of its 2021 Notes. The 2021 Notes were issued pursuant to
the 2016 Indenture dated (December 7, 2016). The net proceeds from this purchase agreement were $9.5 million, after deducting the
Company’s offering expenses.

F-24

NOTE 10 – CONVERTIBLE NOTES (continued):

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Holders may convert their 2021 Notes at any time. The initial conversion rate for the 2021 Notes is 117.64706 shares of the Common Stock
for each $1,000 principal amount of 2021 Notes (equivalent to an initial conversion price of approximately $8.50 per share of the Common
Stock). Upon conversion, the Company may settle the 2021 Notes by paying or delivering, as the case may be, cash, shares of Common Stock
or a combination thereof, at the Company’s election.

Prior to the maturity date, the Company may redeem in cash:

a) any or all of the 2021 Notes if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive)

during the period of 30 consecutive trading days exceeds 150% of the conversion price on each applicable trading day, or

b) all of the 2021 Notes then outstanding if the aggregate principal amount of the 2021 Notes then outstanding is less than 15% of the

aggregate principal amount of the notes issued.

No redemption was made during the years 2018 and 2019.

The 2021 Notes are guaranteed by the Restricted Subsidiaries (as defined in the 2016 Indenture) and are secured by a first-priority security
interest in all of the present and after-acquired assets of the Company and each of the Restricted Subsidiaries (the “Collateral”), including, but
not limited to, (i) 100% of the capital stock of the Guarantors (as defined in the 2016 Indenture) and each Restricted Subsidiary of the
Company that is held by the Company or any Restricted Subsidiary, (ii) intellectual property, including all copyrights, copyright licenses,
patents, patent licenses, software, trademarks, trademark licenses and trade secrets and other proprietary information, including, but not
limited to, domain names, (iii) all cash, deposit accounts, securities accounts, commodities accounts and contract rights, (iv) all real property
and leased property, subject to applicable minimum thresholds, as set forth in the 2016 Indenture, and (v) all other tangible and intangibles of
the Company and the Guarantors. In connection with the grant of such liens, the Company entered into certain agreements with both
Wilmington Savings Fund Society, FSB, as collateral agent in the United States, and with Altshuler Shaham Trusts Ltd., as security trustee in
Israel. The 2016 Indenture restricts the ability of the Company, the Subsidiaries and any future subsidiaries to make certain investments,
including transfers of the Company’s assets that constitute collateral securing the 2016 Notes, in its existing and future foreign subsidiaries,
subject to certain exceptions.

Upon (i) the occurrence of a fundamental change (as defined in the 2016 Indenture) or (ii) if the Company calls the 2021 Notes for
redemption as described below (either event, a “make-whole fundamental change”) and a holder elects to convert its 2021 Notes in
connection with such make-whole fundamental change, the Company will, in certain circumstances, increase the conversion rate by a number
of additional shares (the “Additional Shares”). In no event will the conversion rate exceed the maximum conversion rate, which is 178.73100
shares per $1,000 principal amount of 2021 Notes, which amount is inclusive of repayment of the principal of the 2021 Notes.

If a fundamental change occurs at any time, holders will have the right, at their option, to require the Company to purchase for cash any or all
of the 2021 Notes, or any portion of the principal amount thereof, that is equal to $1,000 or an integral multiple of $1,000 in excess thereof,
on a date of the Company’s choosing that is not less than 20 calendar days nor more than 35 calendar days after the date of the applicable
fundamental change company notice. The price the Company is required to pay for a 2021 Note is equal to 100% of the principal amount of
such 2021 Note plus accrued and unpaid interest, if any, to, but excluding, the fundamental change purchase date. Under the terms of the 2016
Indenture, the Company is required to maintain a minimum cash balance of at least $7.5 million.

F-25

NOTE 10 – CONVERTIBLE NOTES (continued):

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As the settlement upon conversion was subject to compliance with the listing standards of the NYSE American, until the Company’s
stockholders’ approval was obtained, the Company was prohibited by these rules from issuing shares in excess of 20% of its outstanding
shares (calculated as of December 1, 2016). On April 12, 2017, the Company’s stockholders approved the issuance of shares of the
Company’s Common Stock in excess of 20% of the Company’s outstanding shares of Common Stock to settle conversion requests and pay
interest on the Company’s issued 2021 Notes.

The following table sets forth total interest expense recognized related to the 2021 Notes:

(U.S. Dollars in thousands)
Contractual interest expense
Debt discount amortization
Change in fair value of convertible note embedded derivative
Interest payment in connection with conversions
Loss (income) in connection with conversions
Total

4.5% Convertible Notes Due 2022 (“2022 Notes”)

Year Ended December 31,
2018

2017

2019

4,434 $
2,309
38,061
3,918
(1,643)
47,079 $

4,359 $
2,587

234
245
7,425 $

4,344
2,991

7,335

On July 24, 2017, the Company entered into a privately negotiated exchange agreement (the “2017 Exchange Agreement”) with certain
existing note holders identified therein to exchange $9.0 million aggregate principal amount of the Company’s outstanding 2018 Notes for (i)
$8.55 million aggregate principal amount of the Company’s 4.5% convertible promissory notes due 2022, (ii) $275,000 in cash consideration
and (iii) cash equal to the accrued and unpaid interest on the exchanged 2018 Notes. All of the 2022 Notes were converted during the year
ended December 31, 2017 into 1,123,964 shares of Common Stock.

The following table sets forth total interest expense recognized related to the 2022 Notes:

(U.S. Dollars in thousands)
Contractual interest expense
Debt premium amortization
Loss on extinguishment
Total

NOTE 11 - FAIR VALUE MEASUREMENT

Year Ended
December 31, 2017

55
(46)
1,325
1,334

The Company discloses fair value measurements for financial assets and liabilities. Fair value is based on the price that would be received from
the sale of an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.

The accounting standard 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: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3
inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value.

F-26

NOTE 11 – FAIR VALUE MEASUREMENT (continued):

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair value of the financial instruments included in the working capital of the Company is usually identical or close to their carrying value. The
fair value of the convertible notes derivative is based on level 3 measurement.

The fair value of the $57.9 million 2021 Notes as of December 31, 2019 is approximately $60.9 million based on a level 3 measurement.

The Company prepared a valuation of the fair value of the 2021 Notes (a Level 3 valuation) as of December 31, 2019. The value of these notes
were estimated by implementing the binomial model. The liability component was valued based on the Income Approach. The following
parameters were used:

Stock price (USD)
Expected term
Risk free rate
Volatility
Yield

2021 Notes

3.28
1.88
1.57%
90.74%
11.02%

NOTE 12 - TAXES ON INCOME

a. The Company

Protalix BioTherapeutics, Inc. is taxed according to U.S. tax laws. The Company’s income is taxed in the United States at the rate of up to
27%.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted into law. The new legislation represents fundamental and dramatic
modifications to the U.S. tax system. The Act contained several key tax provisions that impacted the Company including the reduction of the
maximum U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Other significant changes under the Act
included, among others, a one-time repatriation tax on accumulated foreign earnings, a limitation of net operating loss deduction to 80% of
taxable income, and indefinite carryover of post-2017 net operating losses. The Act also repealed the corporate alternative minimum tax for
tax years beginning after December 31, 2017. Losses generated prior to January 1, 2018 will still be subject to the 20-year carryforward
limitation and the alternative minimum tax.

Other impacts due to the Act included the repeal of the domestic manufacturing deduction, modification of taxation of controlled foreign
corporations, a base erosion anti-abuse tax, modification of interest expense limitation rules, modification of limitation on deductibility of
excessive executive compensation, and taxation of global intangible low-taxed income.

Modification of interest expense limitation rules under the Act provides generally that for taxable years 2018-2021 interest expense deduction
shall be limited to 30% of the EBITDA and for taxable years 2022 onwards to 30% of EBIT. Disallowed interest deduction may be carried
forward indefinitely. The Company believes that any potential impact (if applicable) of this limitation will be offset by utilization of available
net operating losses.

U.S. GAAP requires that the impact of tax legislation be recognized in the period in which the law was enacted.

The Company believes that all future profits of its subsidiaries will be indefinitely reinvested or that there is no expectation to distribute any
taxable dividends from these subsidiaries. The determination of the amount of the unrecognized deferred tax liability related to the
undistributed earnings is estimated as an immaterial amount.

F-27

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – TAXES ON INCOME (continued):

b. Protalix Ltd.

The Israeli Subsidiary is taxed according to Israeli tax laws:

1. Tax rates

The income of the Israeli Subsidiary, other than income from “Approved Enterprises,” is taxed in Israel at the regular corporate tax rates.

In December 2016, the Economic Efficiency Law (Legislative Amendments for Implementing the Economic Policy for the 2017 and
2018 Budget Years), 2016 was published, introducing a gradual reduction in corporate tax rate from 25% to 23%. However, the law also
included a temporary provision setting the corporate tax rate in 2017 at 24%. As a result, the corporate tax rate was 23% in 2018 and is
23% in 2019 and thereafter.

Capital gain on a sale of assets is subject to capital gain tax according to the corporate tax rate in effect in the year during which the assets
are sold.

2. The Law for the Encouragement of Capital Investments, 1959 (the “Encouragement of Capital Investments Law”)

Under the Encouragement of Capital Investments Law, including Amendment No. 60 to the Encouragement of Capital Investments Law
as published in April 2005, by virtue of the “Approved Enterprise” or “Benefited Enterprise” status the Israeli Subsidiary is entitled to
various tax benefits as follows:

a. Reduced tax rates

Income derived from the Approved Enterprise during a 10-year period commencing upon the year in which the enterprise first
realizes taxable income is tax exempt, provided that the maximum period to which it is restricted by the Encouragement of Capital
Investments Law has not elapsed.

The Israeli Subsidiary has an “Approved Enterprise” plan since 2004 and “Benefited Enterprise” plan since 2009. The period of
benefits in respect of the main enterprise of the Company has not yet commenced. The period during which the Company is entitled
to benefits in connection with the Benefited Enterprise expires in 2021.

If the Israeli Subsidiary subsequently pays a dividend out of income derived from the “Approved Enterprise” or “Benefited
Enterprise” during the tax exemption period, it will be subject to tax on the gross amount distributed (including the company tax on
these amounts), at the rate which would have been applicable if such income not been exempted.

b. Accelerated depreciation

The Israeli Subsidiary is entitled to claim accelerated depreciation, as provided by Israeli law, in the first five years of operation of
each asset, in respect of buildings, machinery and equipment used by the Approved Enterprise and the Benefited Enterprise.

c. Conditions for entitlement to the benefits

The Israeli Subsidiary’s entitlement to the benefits described above is subject to its fulfillment of conditions stipulated by the law,
rules and regulations published thereunder, and the instruments of approval for the specific investment in an approved enterprise.
Failure by the Israeli Subsidiary to comply with these conditions may result in the cancellation of the benefits, in whole or in part,
and the Subsidiary may be required to refund the amount of the benefits with interest. The Israeli Subsidiary received a final
implementation approval with respect to its “Approved Enterprise” from the Investment Center.

F-28

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – TAXES ON INCOME (continued):

d. Amendment of the Law for the Encouragement of Capital Investments, 1959

In recent years, several amendments have been made to the Encouragement of Capital Investments Law which have enabled new
alternative benefit tracks, subject to certain conditions. The Encouragement of Capital Investments Law was amended as part of the
Economic Policy Law for the years 2011-2012 (amendment 68 to the Encouragement of Capital Investments Law), which was
passed by the Israeli Knesset on December 29, 2010. The amendment sets alternative benefit tracks to those currently in effect under
the provisions of the Encouragement of Capital Investments Law. On December 29, 2016, Amendment 73 to the Encouragement of
Capital Investments Law was published. This amendment sets new benefit tracks, inter alia, “Preferred Technological Enterprise”
and “Special Preferred Technological Enterprise” (the “Capital Investments Law Amendment”). To date, the Company has elected
not to have the Capital Investments Law Amendment apply to the Company.

c. Tax losses carried forward to future years

As of December 31, 2019, the Company had aggregate net operating loss (“NOL”) carry-forwards equal to approximately $213.1 million that
are available to reduce future taxable income as follows:

1. The Company

The Company’s carry-forward NOLs, equal to approximately $29.0 million (as of December 31, 2018, approximately $26 million), may
be restricted under Section 382 of the Internal Revenue Code (“IRC”). IRC Section 382 applies whenever a corporation with NOL
experiences an ownership change. As a result of IRC Section 382, the taxable income for any post change year that may be offset by a
pre-change NOL may not exceed the general IRC Section 382 limitation, which is the fair market value of the pre-change entity
multiplied by the IRC long-term tax exempt rate.

Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a
valuation allowance, the Company considered all available evidence, including past operating results, the most recent projections for
taxable income, and prudent and feasible tax planning strategies. The Company reassesses its valuation allowance periodically and if
future evidence allows for a partial or full release of the valuation allowance, a tax benefit will be recorded accordingly.

2. Protalix Ltd.

At December 31, 2019, the Israeli Subsidiary had approximately $184.1 million (as of December 31, 2018, approximately $185 million)
of carry-forward NOLs that are available to reduce future taxable income with no limited period of use.

d. Deferred income taxes:

The components of the Company’s net deferred tax assets at December 31, 2018 and 2019 were as follows:

(U.S. dollars in thousands)
In respect of:

Research and development expenses
Other timing differences
Net operating loss carry forwards

Valuation allowance

December 31,

2018

2019

6,188 $
(11)
49,436
(55,613)
-

9,247
25
50,236
(59,508)
-

Deferred taxes are computed using the tax rates expected to be in effect when those differences reverse.

F-29

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – TAXES ON INCOME (continued):

e. Reconciliation of the theoretical tax expense to actual tax expense

The main reconciling item between the statutory tax rate of the Company and the effective rate is the provision for a full valuation allowance
in respect of tax benefits from carry forward tax losses due to the uncertainty of the realization of such tax benefits (see above).

f. Tax assessments

In accordance with the Income Tax Ordinance, as of December 31, 2019, all of Protalix Ltd.’s tax assessments through tax year 2014 are
considered final. A summary of open tax years by major jurisdiction is presented below:

Jurisdiction:
Israel
United States (*)

Years:
2015-2019
2015-2019

(*) Includes federal, state and local (or similar provincial jurisdictions) tax positions.

NOTE 13 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION

Balance sheets:

(U.S. dollars in thousands)
a. Other assets:
Institutions
State of Israel (see note 6a)
Restricted deposit
Prepaid expenses
Sundry

(U.S. dollars in thousands)
b. Accounts payable and accruals – other:
Payroll and related expenses
Interest payable
Provision for vacation
Accrued expenses
Royalties payable
Property and equipment suppliers

NOTE 14 - RELATED PARTY TRANSACTIONS

(U.S. dollars in thousands)
Compensation (including share-based compensation) to the non-

December 31,

2018

2019

574 $
190
561
453
99
1,877 $

604
26
820
314
68
1,832

December 31,

2018

2019

1,099 $
555
1,658
6,368
369
225
10,274 $

1,381
555
1,754
7,360
757
98
11,905

Year Ended December 31,
2018

2019

2017

executive directors

499 $

467 $

444

F-30

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - SELECTED QUARTERLY FINANCIAL DATA (Unaudited)

Summarized quarterly financial data for the years ended December 31, 2019 and 2018 are set forth in the following tables:

Three Months Ended

2018

2019

(U.S. dollars in thousands, except per share data)

March 31
Revenues from selling goods
$
Revenues from license agreements
Operating (loss) profit
Net (loss) profit for the period
Net basic and diluted income
(loss) per share of common
stock

4,553 $
2,161
(5,151)
(7,239) $

(0.5) $

June 30 Sept. 30 Dec. 31 March 31

2,006 $
2,832
(6,744)
(8,462) $

663 $
11,672
(3,741)
(5,322) $

1,756 $
8,597
(3,672)
(5,434) $

3,530 $
6,909
(5,534)
(7,264) $

June 30 Sept. 30 Dec. 31
3,780
13,979
2,200
291

5,126 $
9,122
(1,544)
(3,560) $

3,430 $
8,817
(5,839)
(7,743) $

(0.6) $

(0. 4) $

(0.5) $

(0.2) $

0.02

NOTE 16 - SUBSEQUENT EVENTS

On March 12, 2020, the Company entered into securities purchase agreements (the “Purchase Agreements”), with certain existing and new institutional and
other accredited investors (the “Purchasers”). Pursuant to the Purchase Agreements, the Company, in a private placement in reliance on the exemption from
the registration requirements of the Securities Act (the “Private Placement”), agreed to issue and sell to the Purchasers an aggregate of approximately 17.6
million unregistered shares of Common Stock at a price per share of $2.485. Upon the closing, the Company will generate gross proceeds equal to
approximately $43.7 million in the Private Placement. Each share of Common Stock issued was accompanied by a warrant to purchase one share of
Common Stock (the “Warrant Shares”), at an exercise price equal to $2.36.

In accordance with ASC 855 “Subsequent Events” the Company evaluated subsequent events through the date the condensed consolidated financial
statements were issued. The Company concluded that no other subsequent events have occurred that would require recognition or disclosure in the
consolidated financial statements.

F-31

DESCRIPTION OF CAPITAL STOCK

Exhibit 4.7

The following summarizes the material terms of the capital stock of Protalix BioTherapeutics, Inc. We are a Delaware corporation. The rights of our
stockholders are governed by the Delaware General Corporation Law (the “DGCL”) and by our Certificate of Incorporation, as amended, and our Bylaws,
which are exhibits to our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “Commission”) and available at
www.sec.gov. The following summary is qualified in its entirety by reference to the applicable provisions of the DGCL and our Certificate of Incorporation,
as amended, and Bylaws, which are subject to future amendment in accordance with the provisions thereof. Our common stock is the only class of our
securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Authorized Capital Stock

General. Our charter provides that we may issue up to 120,000,000 shares of common stock, par value $0.001 per share, and 100,000,000 shares of
preferred stock, par value $0.0001 per share. The number of shares of our common stock issued and outstanding as of a recent date is set forth on the cover
page of our most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q filed with the Commission. We currently have no outstanding
shares of preferred stock.

Common Stock

Voting Rights. Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have
cumulative voting rights. Accordingly, holders of a majority of the shares of common stock entitled to vote in any election of directors may elect all of the
directors standing for election.

Dividends. Subject to the preferential rights, if any, of the holders of any outstanding series of our preferred stock, holders of shares of our common stock
are entitled to receive dividends when, as and if declared by our Board of Directors (our “Board”) out of funds legally available therefor.

Dividend Policy. We have never declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings to finance the
growth and development of our business and therefore do not anticipate paying any cash dividends in the foreseeable future. Any future determination to
pay cash dividends will be at the discretion of our Board and will depend upon our financial condition, operating results, capital requirements, covenants in
our debt instruments (if any), and such other factors as our Board deems relevant.

Liquidation. In the event of our liquidation, dissolution or winding-up, after payment of all of our debts and liabilities, the holders of our common stock are
entitled to share ratably in all remaining assets available for distribution after the payment of debts and liabilities and after provision has been made for
each class of stock, if any, having preferences over our common stock. Holders of our common stock, as such, have no preemptive or other rights and there
are no redemption provisions applicable to our common stock. All of our outstanding shares of common stock are fully paid and nonassessable. The rights,
preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of
preferred stock that we may designate and issue in the future. In accordance with the rules of the Tel Aviv Stock Exchange, we are allowed to issue
securities with preferential rights relating to dividends, but such securities may not have voting rights.

Other Rights. The holders of our common stock have no preemptive rights and no rights to convert their common stock into any other securities, and our
common stock is not subject to any redemption or sinking fund provisions.

Preferred Stock

Our Certificate of Incorporation, as amended, authorizes the issuance of up to 100,000,000 shares of preferred stock with such voting rights, rights of
redemption and other relative rights and preferences as may be determined from time to time by our Board. Accordingly, our Board is empowered, without
stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power
or other rights of the holders of our common stock. The preferred stock could be utilized, under certain circumstances, as a method of discouraging,
delaying or preventing a change in control of our company.

Anti-Takeover Effects of Provisions of Delaware Law, Our Certificate of Incorporation, as Amended, and Our By-laws

Delaware statutory law, our Certificate of Incorporation, as amended, and our Bylaws contain provisions that could make acquisition of our Company by
means of a tender offer, a proxy contest or otherwise more difficult. These provisions are intended to discourage certain types of coercive takeover
practices and takeover bids that our Board may consider inadequate and to encourage persons seeking to acquire control of us to first negotiate with our
Board. We believe that the benefits of increased protection of our ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire
or restructure us outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals
could result in an improvement of their terms. The description of our Certificate of Incorporation, as amended, and our Bylaws set forth below is only a
summary and is qualified in its entirety by reference to our amended and restated certificate of incorporation and amended and restated Bylaws, which are
exhibits to our most recent Annual Report on Form 10-K.

Blank Check Preferred Stock. Our amended and restated certificate of incorporation permits us to issue, without any further vote or action by the
stockholders, up to 100,000,000 shares of preferred stock in one or more series and, with respect to each such series, to fix the number of shares
constituting the series and the designation of the series, the voting powers (if any) of the shares of the series, and the preferences and relative, participating,
optional and other rights, if any, and any qualifications, limitations or restrictions, of the shares of such series. The ability to issue such preferred stock
could discourage potential acquisition proposals and could delay or prevent a change in control.

Number of Directors; Filling Vacancies; Removal. Our Bylaws provide that the number of directors which shall constitute the whole of the Board shall be
fixed from time to time by resolution of the Board. Directors shall be elected by a plurality vote of the shares represented in person or by proxy at the
annual meeting of stockholders in each year and entitled to vote on the election of directors. Elected directors shall hold office until the next annual meeting
and until their successors shall be duly elected and qualified. Directors need not be stockholders. If, for any cause, the Board shall not have been elected at
an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of stockholders called for that purpose in the manner provided
in our Bylaws. In addition, our amended and restated certificate of incorporation and amended and restated Bylaws provide that a Board vacancy resulting
from the death, removal or resignation of a director, as well as a vacancy resulting from an increase in the number of directors or if the stockholders fail at
any meeting of stockholders at which directors are to be elected to elect the number of directors then constituting the whole Board, may be filled solely by
the affirmative vote of a majority of the remaining directors then in office even though that may be less than a quorum of the Board.

Special Meetings. Special Meetings of our stockholders may be called, for any purpose or purposes, by the Chairman of the Board or the President or the
Board of Directors at any time. Upon written request of any stockholder or stockholders holding in the aggregate not less than 10% of all of the votes
entitled to be cast on any issue proposed to be considered at the Special Meeting signed, dated and delivered in person or sent by registered mail to the
Chairman of the Board, President or Secretary of our company, the Secretary shall call a special meeting of stockholders to be held at the principal office of
the corporation or at such place and at such time as the Secretary may fix, such meeting to be held not less than 10 nor more than 60 days after the receipt
of such request, and if the Secretary shall neglect or refuse to call such meeting within seven days after the receipt of such request, the stockholder making
such request may do so.

No Stockholder Action by Written Consent Unless Approved by the Board. Our Bylaws requires that all actions to be taken by stockholders must be taken at
a duly called annual or special meeting, and stockholders are not permitted to act by written consent. These provisions will make it more difficult for
stockholders to take an action opposed by our Board.

Section 203 of the Delaware General Corporation Law. Section 203 of the DGCL provides that, subject to certain specified exceptions, a corporation will
not engage in any “business combination” with any “interested stockholder” for a three-year period following the time that such stockholder becomes an
interested stockholder unless (1) before that time, the board of directors of the corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder, (2) upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding certain shares) or (3) on or after such time, both the board of directors of the corporation and at least 662/3% of the
outstanding voting stock which is not owned by the interested stockholder approves the business combination. Section 203 of the DGCL generally defines
an “interested stockholder” to include (x) any person that owns 15% or more of the outstanding voting stock of the corporation, or is an affiliate or
associate of the corporation and owned 15% or more of the outstanding voting stock of the corporation at any time within three years immediately prior to
the relevant date and (y) the affiliates and associates of any such person.

Section 203 of the DGCL generally defines a “business combination” to include (1) any merger or consolidation with an interested stockholder or other
entity if the merger or consolidation is caused by the interested stockholder and as a result section (a) of Section 203 is no longer applicable to the surviving
entity, (2) sales or other dispositions of 10% or more of the corporation’s assets with or to an interested stockholder, (3) certain transactions resulting in the
issuance or transfer to the interested stockholder of any stock of the corporation or its subsidiaries, (4) certain transactions which would increase the
proportionate share of the stock of the corporation or its subsidiaries owned by the interested stockholder and (5) receipt by the interested stockholder of the
benefit (except proportionately as a stockholder) of any loans, advances, guarantees, pledges, or other financial benefits.

We have elected not to be subject to Section 203 of the DGCL.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company.

Listing Information

Our common stock is listed on the NYSE American and the Tel Aviv Stock Exchange under the symbol “PLX.”

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-230604) and on Form S-8 (No. 333-148983,
No. 333-182677, No. 333-203960 and No. 333-225526) of Protalix BioTherapeutics, Inc. of our report dated March 12, 2020 relating to the financial
statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

Exhibit 23.1

/s/ Kesselman & Kesselman

Kesselman & Kesselman
Certified Public Accountants (lsr.)
A member firm of PricewaterhouseCoopers International Limited

Tel-Aviv, Israel
March 12, 2020

EXHIBIT 31.1

I, Dror Bashan, certify that:

I have reviewed this Annual Report on Form 10-K of Protalix BioTherapeutics, Inc.;

CERTIFICATION

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the

financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in

Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:

(a)

(b)

(c)

(d)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the

registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably

likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control

over financial reporting.

Dated: March 12, 2020

/s/ Dror Bashan
Dror Bashan
President and Chief Executive Officer

EXHIBIT 31.2

I, Eyal Rubin, certify that:

I have reviewed this Annual Report on Form 10-K of Protalix BioTherapeutics, Inc.;

CERTIFICATION

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:

(a)

(b)

(c)

(d)

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.

Dated: March 12, 2020

/s/ Eyal Rubin
Eyal Rubin
Sr. Vice President, Chief Financial Officer, Treasurer

PROTALIX BIOTHERAPEUTICS, INC.

CERTIFICATION

EXHIBIT 32.1

In connection with the Annual Report of Protalix BioTherapeutics, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2019 as filed
with the Securities and Exchange Commission (the “Report”), I, Dror Bashan, President and Chief Executive Officer of the Company, hereby certify as of
the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at
the dates and for the periods indicated.

This Certificate is being furnished to the Securities and Exchange Commission as an exhibit to the Report.

Dated: March 12, 2020

/s/ Dror Bashan
Dror Bashan
President and Chief Executive Officer

PROTALIX BIOTHERAPEUTICS, INC.

CERTIFICATION

EXHIBIT 32.2

In connection with the Annual Report of Protalix BioTherapeutics, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2019 as filed
with the Securities and Exchange Commission (the “Report”), I, Eyal Rubin, Vice President and Chief Financial Officer of the Company, hereby certify as
of the date hereof, solely for the purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at
the dates and for the periods indicated.

This Certificate is being furnished to the Securities and Exchange Commission as an exhibit to the Report.

Dated: March 12, 2020

/s/ Eyal Rubin
Eyal Rubin
Sr. Vice President and Chief Financial Officer