Protalix BioTherapeutics, Inc. Annual Report 2020

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FY2020 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, 2020

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 University Plaza
Suite 100
Hackensack, NJ
(Address of principal executive offices)

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

07601
(Zip Code)

(201) 696-9345
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
Emerging growth 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. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under

Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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, 2020 was approximately $121.4 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, 2021, approximately 45,382,831 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 2021 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.

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FORM 10-K
TABLE OF CONTENTS

PART I

Business

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

Properties
Legal Proceedings

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

PART II

Securities
Selected Financial Data

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

PART III
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

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

PART IV

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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
AND RISK FACTORS SUMMARY

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, particularly with respect to our plans and strategy for our business and related financing, includes 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 timing, progress and likelihood of final approval by the U.S. Food and Drug Administration, or the
FDA, of the Biologics License Application, or BLA, for PRX-102, by the April 27, 2021 Prescription Drug User Fee Act,
or PDUFA, date or at all, and, if approved, whether the use of PRX-102 will be commercially successful;

●

the risk that the FDA, the European Medicines Agency, or EMA, or other foreign regulatory authorities

may not accept or approve a marketing application we file for any of our product candidates;

●

risks associated with the novel coronavirus disease, or COVID-19, outbreak, which may adversely

impact our business, preclinical studies and clinical trials;

●

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 evaluation and pursuit of strategic alternatives;

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

including, but not limited to, Pfizer Inc., or Pfizer, Chiesi Farmaceutici S.p.A., or Chiesi, and SarcoMed USA Inc., or
SarcoMed;

●

risks relating to our ability to make required payments under our outstanding 7.50% convertible

promissory notes due November 2021, or the 2021 Notes, or any other indebtedness;

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●

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;

●

risks related to the compliance by SarcoMed with the terms and conditions of the license agreement

between the parties, and to its performance under the arrangement;

●

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;

●
product candidates;

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

●

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 certain regulatory authorities and of certain of our suppliers, collaborative
partners, licensees, clinical trial sites, distributors and customers.

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 ProCellEx® 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 through ProCellEx
while genetically engineering and/or chemically modifying the proteins pre- and/or 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. Our clinical development
program for pegunigalsidase alfa, or PRX-102, for the potential treatment of Fabry disease is in advanced clinical stages. In
addition, we are planning to collaborate with SarcoMed with respect to alidornase alfa, or PRX-110, for use in the
treatment

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of any human respiratory disease or condition via inhaled delivery, and we are developing uricase, or PRX-115, for the
treatment of refractory gout, PRX-119, a long action DNase I for the treatment of NETs-related diseases, and a number of
other product candidates in early and preclinical development.

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; 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 Current Good Manufacturing Practice, or
cGMP-, compliant, controlled processes. Our plant cell culture technology uses cells, such as carrot and

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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

Elelyso®

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 Vpriv® (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 2020, we generated $8.0 million from sales
of BioManguinhos alfataliglicerase to the Brazilian MoH.

Pegunigalsidase alfa (PRX-102)

Pegunigalsidase alfa, or PRX-102, is our late-stage clinical asset in development for the treatment of Fabry disease. On
August 11, 2020, we, together with Chiesi, announced that the FDA had accepted the BLA for PRX-102, which was filed
under the Accelerated Approval Pathway, and granted Priority Review designation for PRX-102, for the proposed
treatment of adult patients with Fabry disease. The FDA noted in its BLA filing communication letter that it is not
currently planning to hold an advisory committee meeting to discuss the application. The FDA initially set an action date of
January 27, 2021 under the PDUFA. However, as we previously announced in November 2020, the FDA extended the
PDUFA action date to April 27, 2021. As we disclosed last year, the FDA advised us that it will have to inspect our
manufacturing facility and the facility of a third party in Europe that performs fill and finish processes for PRX-102 as part
of its review of the BLA to ensure cGMP compliance. Due to COVID-19-related FDA travel restrictions, the FDA has
advised that it may be unable to conduct the inspections prior to the PDUFA action date. We, together with Chiesi, are
currently addressing this issue.

PRX-102 is the subject of three phase III clinical trials (BALANCE, BRIDGE and BRIGHT). The BALANCE study, which
is fully-enrolled, is ongoing; the BRIDGE and BRIGHT studies have been completed. Our phase I/II clinical trial of PRX-
102, which was completed in 2015, was a study in naïve, or untreated, Fabry patients 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 in a long-term extension study. In December 2020, we, together with Chiesi, announced positive final results 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 in February 2021, we, together with Chiesi, announced
positive topline results from the BRIGHT phase III 12-month, open-label, switch-over study designed to evaluate the
safety, efficacy and pharmacokinetics of PRX-102 treatment, 2 mg/kg every four weeks, in up to 30 patients with Fabry
disease previously treated with a commercially available enzyme replacement therapy, or ERT, (agalsidase alfa – Replagal
or agalsidase beta – Fabrazyme®). We anticipate announcing interim results from our BALANCE trial in the first half of
2021.

We have entered into two exclusive global licensing and supply agreements (ex-U.S. and U.S.) with Chiesi for PRX-102;
on October 19, 2017, Protalix Ltd., our wholly-owned subsidiary, entered into an Exclusive License and

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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 US Agreement, with respect to the commercialization
of PRX-102 in the United States.

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. On February 10, 2021, we entered into an exclusive worldwide license agreement with
SarcoMed with respect to PRX-110 for use in the treatment of any human respiratory disease or condition including, but
not limited to, sarcoidosis, pulmonary fibrosis and other related diseases via inhaled delivery.

PRX-115

PRX-115 is our plant cell-expressed recombinant PEGylated Uricase (urate oxidase) – a chemically modified enzyme
under development for the potential treatment of refractory gout. Gout is the most common inflammatory arthritis in the
United States, affecting an estimated 9.2 million adults. An estimated approximately 2% of the gout population is
considered to have chronic refractory disease. The uricase enzyme converts uric acid to allantoin, which is easily
eliminated through urine. However the uricase enzyme does not exist naturally in humans. We use ProCellEx to express an
optimized recombinant uricase enzyme under development for the potential treatment of refractory gout which we are
designing to have an improved half-life, reduced immunogenicity and potentially longer-term efficacy.

PRX-119

PRX-119 is our plant cell-expressed PEGylated recombinant human DNase I product candidate which we are designing to
have an elongated half-life in the circulation for the potential treatment of NETs-related diseases. NETs, Neutrophil
extracellular traps, are web-like structures, released by activated neutrophils that trap and kill a variety of microorganisms.
NETs are composed of DNA, histones, antimicrobial and pro-inflammatory proteins. Excessive formation or ineffective
clearance of NETs can cause different pathological effects. NETs formation has been observed in various autoimmune,
inflammatory and fibrotic conditions, diverse forms of thrombosis, cancer and metastasis. According to scientific literature,
animal studies have demonstrated that DNase I treatment reduce NETs toxicity. Our proprietary modified DNase I may
potentially enable effective treatment of acute and chronic conditions.

2020 and Recent Company Developments

Recent Developments

●

On February 23, 2021, we, together with Chiesi, announced positive topline results from our BRIGHT

study designed to evaluate the safety, efficacy and pharmacokinetics of PRX-102 treatment, 2 mg/kg every four weeks, in
up to 30 patients with Fabry disease previously treated with a commercially available ERT (agalsidase alfa – Replagal® or
agalsidase beta – Fabrazyme®).

●

On February 18, 2021, we announced the closing of a public offering of our common stock raising gross

proceeds of approximately $40.2 million at a price equal to $4.60 per share, before deducting the underwriting discount
and estimated expenses of the offering.

●

On February 11, 2021, we announced an exclusive worldwide license agreement with SarcoMed for

PRX-110 for use in the treatment of any human respiratory disease or condition including, but not limited to, sarcoidosis,
pulmonary fibrosis, and other related diseases via inhaled delivery.

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2020 Developments

study.

●

On December 30, 2020, we, together with Chiesi, announced final study results from the BRIDGE

On October 2, 2020, we, together with Chiesi, announced the launch of an Expanded Access Program

(EAP) in the United States for pegunigalsidase alfa for the proposed treatment of Fabry disease.

●

On October 1, 2020, we entered into an ATM Equity OfferingSM Sales Agreement, or the Sales

Agreement, with BofA Securities, Inc., or the Agent. Pursuant to the terms of the Sales Agreement, we may sell from time
to time through the Agent shares of our common stock having an aggregate offering price of up to $30 million, or the
ATM program. We intend to use the net proceeds from the offering, after deducting the Agent’s commissions and our
offering expenses, for general corporate purposes.

●

On September 3, 2020, we received notification from the NYSE American LLC, or the NYSE

American, that we had regained compliance with all of the continued listing standards set forth in Part 10 of the NYSE
American Company Guide.

●

On August 24, 2020, we, together with Chiesi, announced completion of the treatment period of our

BRIGHT study for the proposed treatment of Fabry disease.

●

On August 11, 2020, we, together with Chiesi, announced that the FDA had accepted the BLA for PRX-

102, and granted Priority Review designation for PRX-102, for the proposed treatment of adult patients with Fabry
disease. The FDA indicated in the BLA filing communication letter that it is not currently planning to hold an advisory
committee meeting to discuss the application. The FDA set a PDUFA action date of January 27, 2021. However, as we
previously announced in November 2020, the FDA subsequently extended the PDUFA action date to April 27, 2021. As
we disclosed last year, the FDA advised us that it will have to inspect our manufacturing facility and the facility of a third
party in Europe that performs fill and finish processes for PRX-102 as part of its review of the BLA to ensure cGMP
compliance. Due to COVID-19-related FDA travel restrictions, the FDA has advised that it may be unable to conduct the
inspections prior to the PDUFA action date. We, together with Chiesi, are addressing this issue.

●

On June 8, 2020, we announced the promotion of Einat Brill Almon, Ph.D. to Sr. Vice President and
Chief Development Officer. Dr. Almon first joined Protalix Ltd. in December 2004, originally as a Senior Director and
later as Vice President, and became our Senior Vice President, Product Development in 2006.

●

On June 8, 2020, we announced the appointment of Yael Hayon, Ph.D. to serve as our new Vice

President, Research and Development, effective July 5, 2020. Yoseph Shaaltiel, Ph.D. retired from his position as our
Executive Vice President, Research and Development, effective June 15, 2020.

●

On May 28, 2020, we, together with Chiesi, announced the submission on May 27, 2020 of a BLA to the

FDA for pegunigalsidase alfa for the treatment of adult patients with Fabry disease via the FDA’s Accelerated Approval
pathway.

●

On May 11, 2020, we announced positive topline results from our BRIDGE study.

On March 18, 2020, we completed a private placement to certain existing and new institutional and other

accredited investors, or the Purchasers, in reliance on the exemption from registration set forth in Section 4(a)(2) of the
Securities Act. We sold approximately 17.6 million shares of our common stock to the Purchasers at a price per share of
$2.485, or aggregate net committed proceeds equal to approximately $41.3 million. Each share of our common stock
issuable in the transaction was accompanied by a warrant to purchase an additional share of common stock at an exercise
price equal to $2.36.

●

On March 16, 2020, we announced that we have agreed to conduct a feasibility study with Kirin

Holdings Company, Limited, or Kirin, to evaluate the production of a novel complex protein utilizing ProCellEx®. Kirin

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will provide research funding for Protalix scientists to conduct cell line engineering and protein expression studies on the
target protein.

●

On February 6, 2020, we announced, together with Chiesi, an agreement with the FDA for the Initial

Pediatric Study Plan (iPSP) for PRX-102. The announcement was made after we and Chiesi completed discussions with
the FDA and receiving confirmation in an official “Agreement Letter” which outlines an agreed approach to address the
needs of pediatric patients with Fabry disease.

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 infusion 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, excluding Brazil. In Brazil,
we maintain the distribution rights to taliglucerase alfa, marketed as BioManguinhos alfataliglicerase, through the Brazil
Agreement. In 2020, we generated approximately $8.0 million from sales of BioManguinhos alfataliglicerase to the
Brazilian MoH.

Gaucher disease, also known as glucocerebrosidase, or GCD, deficiency, is a rare genetic autosomal recessive disorder and
one of the most common Lysosomal Storage Disorders, or 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
prevalence 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 occurrence 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 GCD is infused 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. Developed with our ProCellEx technology, it is a chemically modified version of the recombinant α-
galactosidase-A (α-Gal-A) protein in which protein sub-units are covalently bound via chemical cross-linking using PEG
chains resulting in a more active and stable molecule. It is a late-stage clinical asset and we have completed

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enrollment in all three of our 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. On
August 11, 2020, we, together with Chiesi, announced that the FDA had accepted the BLA for PRX-102, which was filed
under the Accelerated Approval Pathway, and granted Priority Review designation for PRX-102, for the proposed
treatment of adult patients with Fabry disease. The FDA noted in its BLA filing communication letter that it is not
currently planning to hold an advisory committee meeting to discuss the application. The FDA initially set an action date of
January 27, 2021 under the PDUFA. However, as we previously announced in November 2020, the FDA subsequently
extended the PDUFA action date to April 27, 2021. As we disclosed last year, the FDA advised us that it will have to
inspect our manufacturing facility and the facility of a third party in Europe that performs fill and finish processes for PRX-
102 as part of its review of the BLA to ensure cGMP compliance. Due to the FDA’s COVID-19-related FDA travel
restrictions, the FDA has advised that it may be unable to conduct the inspections prior to the PDUFA action date. We,
together with Chiesi, are currently addressing this issue.

The BLA submission includes a comprehensive set of preclinical, clinical and manufacturing data compiled from our
completed phase I/II clinical trial of PRX-102, including the related extension study succeeding our phase I/II clinical trial,
interim clinical data from our phase III BRIDGE switch-over study and safety data from our on-going clinical studies of
PRX-102 in patients receiving 1 mg/kg every other week.

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 in a clinical trial to be performed by Chiesi with our
collaborative efforts.

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.

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, or 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, or 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

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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 represents a
significant potential market opportunity. The global market for Fabry disease is forecasted to be approximately $1.9 billion
in 2021 (Global Data) and to continue to grow at a CAGR of approximately 9.5% (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 BALANCE study, which is fully-enrolled, is currently ongoing; the BRIDGE and
BRIGHT studies have been completed. The designs of these 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. 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
1 mg/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

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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. We anticipate announcing interim results from our BALANCE trial in the first
half of 2021.

Phase III BRIDGE Study

The BRIDGE study was a phase III 12-month open-label, single arm switch-over study evaluating the safety and efficacy
of pegunigalsidase alfa, 1 mg/kg infused every two weeks, in up to 22 Fabry patients. The trial, which is was completed in
December 2019, enrolled patients then being treated with agalsidase alfa, marketed by Takeda Pharmaceutical Company
Limited (formerly Shire Plc) as 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.

Final results of the data generated in the study showed substantial improvement in renal function as measured by mean
annualized estimated Glomerular Filtration Rate, or eGFR, slope in both male and female patients who were switched
from agalsidase alfa to PRX-102. Twenty of 22 patients completed the 12-month treatment duration. Eighteen of the
patients who completed the study opted to roll over to a long-term extension study and continue to be treated with PRX-
102. In the study, the mean annualized eGFR slope of the study participants improved from -5.90 mL/min/1.73m2/year
while on agalsidase alfa to -1.19 mL/min/1.73m2/year on PRX-102 in all patients. Male patients improved from
-6.36 mL/min/1.73m2/year to -1.73 mL/min/1.73m2/year and female patients improved from -5.03 mL/min/1.73m2/year
to -0.21 mL/min/1.73m2/year. Following the switch to PRX-102, there was a decrease in patients with progressing or fast
progressing kidney disease, and most patients achieved a stable status post-switch.

PRX-102 was well-tolerated in the study, with all adverse events being transient in nature without sequelae. Of the
22 patients enrolled in the BRIDGE study, the majority of treatment emergent adverse events were mild or moderate
in severity, with two patients (9.1%) withdrawing from the therapy due to hypersensitivity reaction that was resolved.
The most common moderate treatment emergent adverse events were nasopharyngitis, headache and dyspnea.

An immunogenicity assessment indicated that four out of 20 patients (20%) developed persistent antidrug antibodies over
the course of the study, of which two had neutralizing activity.

Baseline characteristics of the 20 patients that completed the study, ranging from ages 28 to 60 years, were as follows:
2
in females and plasma lyso-Gb3 were 51.81 nM
mean eGFR 75.87 mL/min/1.73m
and 13.81 nM in males and females, respectively. While lyso-Gb3 levels remain slightly high, particularly within the male
cohort, continuous reduction in lyso-Gb3 levels was observed of 19.55 nM (32.35%) in males and 4.57 nM (29.81%) in
females.

2
in males, and 86.14 mL/min/1.73m

Data from the interim analysis of the BRIDGE study, which were first announced in February 2020, were used to support
the PRX-102 BLA filing with the FDA, and we anticipate that the final analysis will be used to support a Marketing
Authorization Application, or MAA, with the EMA.

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Phase III BRIGHT Study

The BRIGHT study was a Phase III 12-month, open-label, switch-over study designed to evaluate the safety, efficacy and
pharmacokinetics of PRX-102 via IV infusions of 2 mg/kg administered every 4 weeks. The trial, which was completed in
June 2020, enrolled up to 30 patients with Fabry disease previously treated with a commercially available ERT (Fabrazyme
or Replagal), for at least three years and on a stable dose administered every two weeks. 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 IV infusions every 2
weeks to 2 mg/kg of PRX-102 every 4 weeks for 12 months. Patients participating in the study were 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
were evaluated to assess the safety and tolerability of PRX-102.

We announced topline results in February 2021. The topline results indicate that 2 mg/kg of PRX-102 administered by
intravenous infusion every four weeks was found to be well tolerated among treated patients, and stable clinical
presentation was maintained in adult Fabry patients. No new patients developed treatment-induced anti-drug antibodies, or
ADA, following the switch to PRX-102 treatment.

The BRIGHT study enrolled 24 adult males and 6 adult females. The most common Fabry disease symptoms were
acroparesthesia, heat intolerance, angiokeratomas and hypohydrosis. All 30 patients received at least one dose of PRX-102,
and 29 patients (mean [SD] age was 40.5 [11.3] years, ranging from 19 to 58 years) completed the 12-month study. Of
these 29 patients, 28 received the intended regimen of 2 mg/kg every four weeks throughout the study, while one patient
was switched to PRX-102 1 mg/kg every two weeks per protocol. One patient withdrew from the study after the first
infusion due to a traffic accident.

Following screening, patients were enrolled and switched from their then current ERT to IV infusions of 2 mg/kg of PRX-
102 every four weeks for 52 weeks (a total of 14 infusions). First infusions of PRX-102 were administered under controlled
conditions at the investigation site. Based on the protocol-specified criteria, patients were able to receive their PRX-102
infusions at a home care setup once the Investigator and Sponsor Medical Monitor agreed that it was safe to do so. Safety
and efficacy exploratory endpoints were assessed throughout the 52-week study.

Study outcome measures showed plasma lyso-Gb3 concentrations remained stable during the study with a mean change of
3.01 nM from baseline (19.36 nM) to Week 52 (22.23 nM). Mean absolute change of eGFR values were stable during the
52-week treatment period, with a mean change from baseline of -1.27 mL/min/1.73m2.

Following a survey of participants using the Quality of Life EQ-5D-5L questionnaire, responses indicate that patient
perception of their own health remained high and stable throughout the 52-week study duration, with overall health mean
(SE) scores of 78.3 (3.1) and 82.1 (2.9) at baseline and Week 52, respectively, in a 0 to 100 scale. Using the short-form
Brief Pain Inventory, or BPI, questionnaire, approximately 75% of study participants had an improvement or no change in
average pain severity at Week 52 (compared to baseline). The short-form BPI interference items also remained stable
during the study. Pain-related results indicate that there was no increase and/or relapse in pain. No Fabry clinical events
were reported during the 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, 1 mg/kg and 2 mg/kg. Each patient received IV infusions of PRX-102 every two weeks
for 12 weeks, with efficacy follow-up after six-month and twelve-month periods. A 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.

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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. 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. 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, or 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.

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. On February 10, 2021, we entered into an exclusive worldwide license
agreement with SarcoMed with respect to PRX-110 for use in the treatment of any human respiratory disease or condition
including, but not limited to, sarcoidosis, pulmonary fibrosis, and other related diseases via inhaled delivery.

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 plant cell-expressed recombinant PEGylated uricase (urate Oxidase) – a chemically modified enzyme
under development for the potential treatment of refractory Gout. Gout is the most common inflammatory arthritis in the
United States, affecting an estimated 9.2 million

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adults. Gout is caused by factors that elevate serum uric acid, sUA, levels, which may include diet or genetic predisposition
and environmental factors leading to hyperuricemia and tissue deposition of monosodium urate crystals, tophi, in joints and
soft tissues, causing acute and chronic inflammation, and is characterized by recurrent flares. Gout flares lead to substantial
morbidity by causing severe pain, reduced quality of life, decreased physical function, increased healthcare costs, and lost
economic productivity. Furthermore, Gout is strongly associated with the metabolic syndrome, and may contribute to
myocardial infarction, type 2 diabetes mellitus, chronic kidney disease, CKD, and premature mortality.

Currently available urate-lowering therapies, or ULTs, can be effective in treating gout. Refractory gout patients are those
whom, despite treatment with existing ULTs, have high flare frequency, consistent tophi, and the inability to maintain
therapeutic goals of urate levels. An estimated approximately 2% of the gout population is considered to have chronic
refractory disease and are in in need of other therapeutic options. One option may be a therapeutic use of the uricase
enzyme which converts uric acid to allantoin, which is easily eliminated through urine. The uricase enzyme does not exist
naturally in humans. To date, two variants of recombinant uricases are approved for marketing: (i) Krystexxa® for
treatment of chronic gout refractory to conventional therapy (no longer approved in the European Union) and (ii) Elitek®,
indicated for the treatment of tumor lysis syndrome but not gout. Both have a black box warning for anaphylaxis, induce
strong immunogenic reactions and have other major side-effects. We use ProCellEx to express an optimized recombinant
uricase enzyme under development for the potential treatment of refractory gout which we are designing to have an
improved half-life, reduced immunogenicity and potentially longer term efficacy.

PRX-119

PRX-119 is our plant cell-expressed PEGylated recombinant human DNase I product candidate being designed to elongate
half-life in the circulation for NETs-related diseases. NETs, Neutrophil extracellular traps, are web-like structures, released
by activated neutrophils that trap and kill a variety of microorganisms. NETs are composed of DNA, histones,
antimicrobial and pro-inflammatory proteins. Excessive formation or ineffective clearance of NETs can cause different
pathological effects. NETs formation has been observed in various autoimmune, inflammatory and fibrotic conditions,
diverse forms of thrombosis, cancer and metastasis. According to scientific literature, animal studies have demonstrated
that DNase treatment reduce NETs toxicity. Our proprietary modified DNase I design for long and customized systemically
circulating in the bloodstream, may potentially enable effective treatment of acute and chronic conditions.

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 and now hold a broad portfolio of more than 90 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 35
pending patent applications.

During 2020, we received a patent in Europe for the patent family named “Large Scale Disposable Bioreactor,” adding to
the more than 10 previously granted patents in this family. We also received patents in Israel and the United States for the
patent family named “Stabilized Alpha-Galactosidase and Uses Thereof,” adding to the more than 20 patents previously
granted in this family. An Israeli patent was also granted for the patent family named “DNase I Polypeptides,
Polynucleotides Encoding Same, Methods of Producing DNase I and uses thereof in Therapy” adding to the already
granted European patent in this family. We also received grant to a patent in the United States. for the patent family
“Chimeric Polypeptides, Polynucleotides Encoding Same, Cells Expressing Same and Methods of Producing Same, a
patent was granted in China for the family “TNFα inhibitor polypeptides, polynucleotides encoding same, cells expressing
same and methods of producing same, adding to the four previously granted patents in this family and a patent was granted
in Canada 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 five previously granted patents in this family. Another patent was
granted in the US named “Oral Composition Comprising A Tnf Antagonist and use Thereof” licensed From Hadasit.

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

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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, 2020, 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

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

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

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

Large Scale Disposable
Bioreactor/PCT/Il2008/000614

Global Pending
Jurisdictions
Brazil

N/A

Brazil

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

Brazil, USA

Nominal
Expiry
2024(1)

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

Israel

2025

USA, Israel

2025

USA

2028

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

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

2028(2)

2031

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

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

Brazil

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

2024(2)

N/A

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

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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

Brazil

Israel, USA

Europe, Israel

N/A

Israel, USA

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

N/A

2033

N/A

USA

N/A

Brazil, Canada, USA

Australia, Japan, Europe, China,
Israel

2034

Israel, China, Japan, Brazil

USA, Europe, Australia, Canada

2034

N/A

USA

2035

(1) Patent granted in Australia expires in 2029.

(2) 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.

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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 two ERTs, Sanofi Genzyme’s Cerezyme and Takeda’s (Shire)
Vpriv. In addition, Actelion markets a small molecule drug for the treatment of mild to moderate Type 1 Gaucher disease
(Zavesca or miglustat), an oral treatment approved by the FDA only for patients for whom ERT is not a therapeutic option.
In addition, Sanofi Genzyme markets a small molecule oral drug, Cerdelga®, approved for Gaucher patients with certain
CYP2D6 metabolizer status.

With respect to Fabry disease, we face competition from Sanofi Genzyme (Fabrazyme), Takeda Shire (Replagal) and
Amicus (Galafold®). 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 refractory gout, we face competition from Horizon Therapeutics Public Limited Company (Krsytexxa),
which is indicated for treatment of chronic gout in adult patients refractory to conventional therapy. In addition, we are
aware of other clinical stage, early clinical stage and experimental refractory or chronic 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. A number of companies have developed or are developing alternative expression technologies.
Examples include Crucell N.V. (acquired by Johnson & Johnson) has an expression system based on human-cell
technology, Dyadic International Inc.’s expression system based on a fungus, Pfenex Inc.’s (acquired by Ligand
Pharmaceuticals Incorporated) bacteria-based expression system, and others. 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

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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. In a
subsequent amendment, we agreed that after the completion of the first 10-year supply period, the supply term would
automatically extend for a five-year period. 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 taliglucerase alfa in Brazil.

Elelyso – Fundação Oswaldo Cruz (Fiocruz)

Elelyso, marketed as BioManguinhos alfataliglicerase in Brazil, is commercialized in Brazil through the Brazil Agreement
with Fiocruz, which became effective in January 2014. Gaucher patients in Brazil 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 27% of Gaucher patients in Brazil.

The Brazil Agreement provides for a staged technology transfer which 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. As Fiocruz has not satisfied
certain purchase commitments under the agreement, we and Fiocruz are currently discussing potential steps to maximize
sales of BioManguinhos alfataliglicerase sales to the Brazilian MoH.

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.

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Manufacturing

We use our current manufacturing facility in Carmiel, Israel, which has approximately 14,700 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 3,400 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

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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.

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●

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 may not result in an 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 affects 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.

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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. In addition, On July 21, 2020, the FDA granted Orphan Drug Designation for alidornase alfa for the treatment of
sarcoidosis.

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

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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.

The PRX-102 BLA was filed under the FDA’s 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.

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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 Ministry of Health 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.

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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

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● 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

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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

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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 Office of the Chief Scientist of the Israeli Department of Labor, or 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 the National
Authority for Technological Innovation, or NATI, which replaced many of the functions of 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, 2020, 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, 2020, Protalix Ltd. either paid or accrued royalties payable of $13.4 million, and Protalix Ltd.’s contingent
liability to NATI with respect to grants received was approximately $39.8 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

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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

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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, 2020, we had 207 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

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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 University Plaza, Suite 100
Hackensack, NJ 07601
Attn: Mr. Eyal Rubin, Sr. Vice President and Chief Financial Officer

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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 the COVID-19 Pandemic

The COVID-19 pandemic, or any other pandemic, epidemic or outbreak of an infectious disease, may adversely
affect our business, results of operations and financial condition.

If a pandemic, epidemic or outbreak of an infectious disease occurs in the United States, Europe, Israel or elsewhere, our
business and operations may be adversely affected. In December 2019, a novel strain of coronavirus, COVID-19, was
identified in Wuhan, China. The virus has spread globally. To date, our clinical trials have not been adversely affected by
COVID-19, although certain practices we have adopted in our offices and facilities in an effort to promote social distancing
have resulted in minor delays in the performance of administrative activities outside of the clinical programs. The spread of
an infectious disease, including COVID-19, may result in the inability of our suppliers to deliver components or raw
materials on a timely basis. In addition, hospitals may reduce staffing and reduce or postpone certain treatments in response
to the spread of an infectious disease, including the diversion of hospitals serving as our clinical trial sites and hospital staff
supporting the conduct of clinical trials. Such events may result in a period of business and manufacturing disruption, and
in reduced operations, any of which could materially affect our business, financial condition and results of operations.
While the extent of the impact of the current COVID-19 pandemic on our business and financial results depends on future
developments which are highly uncertain and cannot be predicted, including new information which may emerge
concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others, a
continued and prolonged public health crisis such as the COVID-19 pandemic may adversely affect our business, results of
operations and financial condition.

The FDA and other regulatory authorities may be unable to conduct required inspections of our facilities due to the
COVID-19 pandemic.

We are subject to inspection by the FDA and comparable foreign regulatory authorities to determine our compliance with
applicable 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 be able to timely conduct such
inspections. The FDA’s action date under the PDUFA for the BLA for PRX-102 is currently April 27, 2021. The FDA
advised us that it requires an inspection of our manufacturing facility and the facility of a third party in Europe that
performs fill and finish processes for PRX-102 as part of the FDA’s review of the BLA application, which inspections have
not yet been scheduled due to the FDA’s travel restrictions resulting from the COVID-19 pandemic. We, together with
Chiesi, are addressing this issue. If the FDA is unable to conduct satisfactory pre-license inspections of the two
manufacturing facilities before the PDUFA action date due to its travel restrictions or otherwise, or if they conclude that, as
a result of these inspections, the facilities are not in substantial compliance with cGMP, there may be adverse consequences
to the approval process and the FDA might not grant PRX-102 marketing approval by the PDUFA action date. Delays in
the approval process or our inability to obtain approval for any reason for any drug candidate may have a material adverse
effect upon our business, results of operations and financial condition.

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 a BLA or an NDA
demonstrating that the drug candidate is safe 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

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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. On
August 11, 2020, we, together with Chiesi, announced that the FDA had accepted the BLA for PRX-102, and granted
Priority Review designation for PRX-102 for the proposed treatment of adult patients with Fabry disease. In the BLA filing
communication letter for PRX-102, the FDA noted that it is not currently planning to hold an advisory committee meeting
to discuss the application. The FDA initially set an action date of January 27, 2021 under the PDUFA. However, as we
previously announced, the FDA subsequently extended the PDUFA action date to April 27, 2021.

As part of the PRX-102 BLA review, the FDA may request additional data or impose other conditions of the submission or
approval or require modifications to our ongoing clinical trials, manufacturing or other processes. The FDA has required
that additional data be provided and in the future may require additional data, studies or clinical trials. In addition, we may
incur significant additional expenditures in order to obtain or maintain FDA approval. Approval of the BLA may also be
subject to post-marketing commitments or requirements, and we may need to develop and/or improve certain antibody or
additional assays as post-marketing requirements or commitments. Even if we comply with all the requests of regulatory
authorities, the FDA and other authorities may ultimately reject the BLA or any other 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. We
cannot assure you that the FDA will approve PRX-102 or any other product candidate on a timely basis, or at all. We also
cannot assure you that the results of our ongoing BALANCE study will demonstrate that our product candidates are safe
and effective for their intended uses.

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:

● 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

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● 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:

● 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:

● 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

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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:

● 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;

● 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, or patients may discontinue their participation in our
clinical trials, which could cause significant delays in the completion of such trials or may negatively impact the
results of these studies and extend the timeline for completion of our development programs or 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. In addition, patients that enroll 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. Any failure to enroll a sufficient number of patients in our clinical trials in a timely manner, if at
all, may have a material adverse effect on our business, results of operations and financial condition.

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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.

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. Our 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.

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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:

● 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. 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

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and commercialization of pegunigalsidase alfa. The successful commercialization of pegunigalsidase alfa will depend on
several factors, including the following:

● successful completion of our ongoing studies of pegunigalsidase alfa;

● Chiesi’s efforts under the Chiesi Agreements;

● 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 inspection of our facilities by the FDA and other foreign regulatory authorities;

● Chiesi’s 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, and more recently, with alidornase 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.

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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:

● 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.

The manufacture of our products is an exacting and complex process, and any manufacturing problems
encountered by us or certain of our suppliers may 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 certain of 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. 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 other 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

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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:

● 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.

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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,
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. 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

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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.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to
accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our
financial and other public reporting, which would harm our business and the trading price of our common stock.

Effective internal control over financial reporting is necessary for us to provide reliable financial reports. Any failure to
implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to
meet our reporting obligations. While our assessment of our internal control over financial reporting resulted in our
conclusion that as of December 31, 2020, our internal control over financial reporting was effective, we cannot predict the
outcome of our testing or any subsequent testing by our auditor in future periods. Any testing by us conducted in
connection with Section 404 of the Sarbanes-Oxley Act, or Section 404, or any subsequent testing by our independent
registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed
to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify
other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in
our reported financial information and affect our reputation, which could have an adverse effect on the trading price of our
common stock.

Our management is required to assess the effectiveness of our internal controls and procedures and disclose changes in
these controls on an annual basis. However, for as long as we are a non accelerated filer, our independent registered public
accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant
to Section 404. An independent assessment of the effectiveness of our internal controls could detect problems that our
management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial
statement restatements and require us to incur the expense of remediation.

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. We have a cybersecurity insurance policy to
protect us from such risks. However, 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 despite our insurance policy, 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

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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 are continuously 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 and
regulations that reduce 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, 2020, are equal to approximately $231.4 million, of which approximately $30.9 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.

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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

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.

We currently have outstanding $57.9 million aggregate principal amount of our 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 $4.1 million due January 2022 (subject to accelerated payment under certain circumstances). 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. Our
ability to make payments with respect to the 2021 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. If, when required, we are unable to comply
with the terms of the 2021 Notes, 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. In addition, certain terms of the
2021 regarding the security interest or future indebtedness may restrict us from adopting any of these alternatives. We may
be unable to obtain amendments and waivers of such restrictions. If there is a default of such notes, the note holders 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. 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 2021 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:

● make it more difficult for us to satisfy our financial obligations, including with respect to the convertible

notes;

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● 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.

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, 2020, 2019 and 2018, we had net losses from
continuing operations of $6.5 million, $18.3 million and $26.5 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

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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:

● 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 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, Chiesi and SarcoMed, we have out-licensed the marketing
rights to Elelyso, pegunigalsidase alfa and alidornase alfa via inhalation, 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

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and with supporting distribution capabilities. Factors that may inhibit our efforts to commercialize our products directly
and without strategic partners include:

● 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:

● 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.

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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:

● 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

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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

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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 of 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, 2020, we had more than 35 pending patent applications of which two are joint pending patent
applications with a third party. 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:

● 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, 2020, we held, or had license rights to, more than 90 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

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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:

● 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:

● 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.

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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, Israel periodically experiences 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. 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.

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 may 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

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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 U.S. 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.

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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, 2018, 2019 and 2020, we recorded grants totaling $2.2 million,
$0.1 million and $0.1 million from NATI, respectively. The grants represent 6.2%, 0.2% and 0.2%, respectively, of our
gross research and development expenditures for the years ended December 31, 2018, 2019 and 2020. 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

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● 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.

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:

● our sale of shares of our common stock under our ATM program, or market expectations that such sales are

to be executed;

● the timing of and any delays in anticipated marketing approvals for pegunigalsidase alfa;

● 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;

● 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 or warrants, or if we sell a substantial amount of our common stock under
our ATM program, 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.

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, upon conversion of our outstanding convertible notes and upon the exercise of our outstanding warrants. At
December 31, 2020, there were outstanding options to purchase common stock issued covering approximately 2.6 million
shares of our common stock with a weighted average exercise price of approximately $5.30

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per share. Also at December 31, 2020, there were approximately 1.5 million shares of common stock available for future
for issuance in connection with future grants of incentives under our amended 2006 stock incentive plan, approximately
6.8 million shares of common stock reserved for issuance upon conversion of our outstanding 2021 Notes and
approximately 17.4 million shares of common stock reserved for issuance upon the exercise of our outstanding warrants.
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.

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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.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We maintain a United States corporate office in Hackensack, New Jersey. Our headquarters, including manufacturing
facility, executive offices and others, are located in Carmiel, Israel. The facilities currently contain approximately
14,700 sq/ft of manufacturing space and 3,400 sq/ft for a pilot plant, 11,700 sq/ft for offsite warehouse space and
approximately 39,100 sq/ft of laboratories, front warehouse and office space, and are leased at a rate of approximately
$70,000 per month. In addition, we are entitled to use an additional 14,500 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.

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PART II

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, 2021, there were approximately 95 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.

Equity Compensation Plan Information

The following table provides information as of December 31, 2020 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

Item 6. Selected Financial Data

Number of Securities
to be Issued
Upon Exercise of

Weighted Average
Exercise Price of

Outstanding Options Outstanding Options

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

2,551,650

—
$

2,551,650

5.30

—
5.30

1,493,626

—
1,493,626

We have omitted this information in accordance with the elimination of Item 301 of Regulation S-K.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is
intended to help the reader understand our results of operations and financial condition. The MD&A is provided as a
supplement to, and should be 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 February 17, 2021, we closed a public offering of our common stock raising gross proceeds of approximately
$40.2 million at a price equal to $4.60 per share, before deducting the underwriting discount and estimated expenses of the
offering. BofA Securities acted as book-running manager for the offering with Oppenheimer & Co. acting as co-manager.

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. In December 2020, we, together with Chiesi,
announced positive final results 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 in February 2021, we,
together with Chiesi, announced positive topline results from the BRIGHT phase III 12-month, open-label, switch-over
study designed to evaluate the safety, efficacy and pharmacokinetics of PRX-102 treatment, 2 mg/kg every four weeks, in
up to 30 patients with Fabry disease previously treated with a commercially available ERT (agalsidase alfa – Replagal or
agalsidase beta – Fabrazyme®). We anticipate announcing interim results from our BALANCE trial in the first half of 2021.

On August 11, 2020, we, together with Chiesi, announced that the FDA had accepted the BLA for PRX-102, which was
filed under the Accelerated Approval Pathway, and granted Priority Review designation for PRX-102, for the proposed
treatment of adult patients with Fabry disease. The FDA noted in its BLA filing communication letter that it is not
currently planning to hold an advisory committee meeting to discuss the application. The FDA initially set an action date of
January 27, 2021 under the PDUFA. However, as we previously announced in November 2020, the FDA subsequently
extended the PDUFA action date to April 27, 2021. As we disclosed last year, the FDA advised us that it will have to
inspect our manufacturing facility and the facility of a third party in Europe that performs fill and finish processes for PRX-
102 as part of its review of the BLA to ensure cGMP compliance. Due to the FDA’s COVID-19-related FDA travel
restrictions, the FDA has advised that it may be unable to conduct the inspections prior to the PDUFA action date. We,
together with Chiesi, are addressing this issue.

Our partnership with Chiesi is based on two agreements. On October 19, 2017, Protalix Ltd. and Chiesi entered into Chiesi
Ex-US Agreement and on July 23, 2018, Protalix Ltd. and Chiesi entered into the Chiesi US Agreement. Under

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each of 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, the Chiesi Ex-US Agreement provided for additional payments to Protalix Ltd. of
up to $25.0 million in pegunigalsidase alfa development costs, capped at $10.0 million per year, and up to $320.0 million,
in the aggregate, in regulatory and commercial milestone payments. The Chiesi US Agreement provided for additional
payments to Protalix Ltd. 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. To date, Protalix Ltd. has received the complete
amount of development costs to which it is entitled under the Chiesi Agreements.

Under the terms of both of the Chiesi Agreements, Protalix Ltd. is required to manufacture all of the pegunigalsidase alfa
needed under the agreements, subject to certain exceptions, and Chiesi is required to 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.

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. As Fiocruz has not satisfied certain purchase commitments under the agreement, we and Fiocruz are
currently discussing potential steps to maximize sales of BioManguinhos alfataliglicerase sales to the Brazilian MoH. We
are continuing 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 our best interest.

In addition to PRX-102, our product pipeline currently includes, among other candidates:

alidornase alfa, or PRX-110, a proprietary plant cell recombinant human Deoxyribonuclease 1, or DNase,

which is subject to an exclusive worldwide license agreement with SarcoMed for use in the treatment of any human
respiratory disease or condition including, but not limited to, sarcoidosis, pulmonary fibrosis, and other related diseases via
inhaled delivery;

PRX-115, our plant cell-expressed recombinant PEGylated uricase (urate Oxidase) – a chemically

modified enzyme to treat refractory gout; and

PRX-119, our plant cell-expressed PEGylated recombinant human DNase I product candidate being

designed to elongate half-life in the circulation for NETs-related diseases.

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

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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.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our financial condition, liquidity, or
results of operations will depend on future developments that are highly uncertain, including as a result of new information
that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic
impact on local, regional, national and international customers and markets.

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, of drug substance to Pfizer
under our Amended Pfizer Agreement and of drug product to Chiesi under the Chiesi Agreements. We recognize revenue
from the Amended Pfizer Agreement 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 Standards Codification 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.

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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.

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

Project
PRX-102 – pegunigalsidase alfa

Status
BRIDGE and BRIGHT studies
complete; BALANCE study fully-
enrolled and ongoing

Expected Near Term Milestones

PDUFA date of PRX-102 BLA
submission is April 27, 2021;
interim results from BALANCE
study in the first half of 2021

PRX-110 – alidornase alfa

Out-licensed human respiratory
indications for inhalation-based
delivery to SarcoMed

PRX-115 – Uricase

PRX-119 – Long Acting DNase I

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. was 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. To date, Protalix Ltd. has received the complete amount of
development costs to which it is entitled under the Chiesi Agreements.

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.”

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Share-Based Compensation

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 related service period. 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.
For grants made to employees we recognize the fair value of the grant as expense over the service period using the
accelerated method while for grants made to consultants and other non-employees we recognize the expenses using the
straight-line accounting 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 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, 2020.

As of December 31, 2020, a total of $57.9 million aggregate principal amount of the 2021 Notes were outstanding. In
addition, as of December 31, 2020, none of the 2018 Notes were outstanding.

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Results of Operations

Year ended December 31, 2020 Compared to the Year Ended December 31, 2019

Revenues from Selling Goods

We recorded revenues of $16.2 million for the year ended December 31, 2020, an increase of $0.3 million, or 2%,
compared to revenues of $15.9 million for the year ended December 31, 2019.

Revenues from License and R&D services

We recorded revenues from license and R&D services of $46.7 million for the year ended December 31, 2020, an increase
of $7.9 million, or 20%, compared to revenues of $38.8 million for the year ended December 31, 2019. Revenues from
license agreements represent the revenues we recognized in connection with the Chiesi Agreements. The increase is
primarily due to revenues recognized in connection with an updated costs estimation throughout the trials until completion
in the amount of $12.8 million which were partially offset due to lower costs incurred in the year ended December 31,
2020.

Cost of Goods Sold

Cost of goods sold was $10.9 million for the year ended December 31, 2020 and the year ended December 31, 2019.

Research and Development Expenses, Net

Research and development expenses, net were $38.2 million for the year ended December 31, 2020, a decrease of
$6.4 million, or 14% from $44.6 million for the year ended December 31, 2019. The decrease is primarily due to the
completion of two out of the three phase III clinical trials of PRX-102 and reduced costs related to the BALANCE Study as
well as a decrease in costs related to manufacturing of our drug in development as some of the manufactured drug product
and related costs have been recorded as inventory.

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.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $11.1 million for the year ended December 31, 2020, an increase of
$1.2 million, or 12%, from $9.9 million for the year ended December 31, 2019. The increase resulted primarily from a
$1.2 million increase in share-based compensation costs related to employees, an increase of $0.4 million in costs related to
our compensation to members of our Board of Directors which was partially offset by a $0.2 million decrease in travel
expenses and a $0.1 million decrease in rent and utilities.

Financial Expenses and Income, Net

Financial expense, net was $9.2 million for the year ended December 31, 2020, an increase of $1.6 million, or 21%,
compared to financial expenses of $7.6 million for the year ended December 31, 2019. Financial expenses are comprised
primarily of interest expense on our outstanding convertible notes equal to $4.3 million for the years ended December 31,
2020 and 2019. The increase resulted primarily from expenses related to our outstanding convertible notes equal to
$1.3 million and an increase of $0.5 million in amortization of debt discount.

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

For a discussion of the year ended December 31, 2019 compared to the year ended December 31, 2018, see Management’s
Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K
for the year ended December 31, 2019.

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Liquidity and Capital Resources

Our sources of liquidity include our cash balances. At December 31, 2020, we had $38.5 million in cash and cash
equivalents and short-term bank deposits. We have primarily financed our operations through equity and debt financings,
business collaborations, and grant funding. During the year ended December 31, 2020, we received total proceeds of
approximately $21.1 million from expense reimbursements in relation to our collaboration with Chiesi and, during the
same period, we received or were entitled to receive total proceeds of approximately $18.2 million from sales of
BioManguinhos alfataliglicerase to Fiocruz and sales of drug substance to Pfizer. In addition, during the year ended
December 31, 2020, we raised gross proceeds equal to $43.7 million in a private placement and gross proceeds equal to
$5.0 million from sales of common stock under our ATM program. Subsequently, from January through February 2021, we
raised gross proceeds equal to approximately $8.8 million from sales of common stock under our ATM program and in
February 2021 we raised gross proceeds of approximately $40.2 million from a public offering of our common stock.

Cash Flows

Net cash used in operations was $26.1 million for the year ended December 31, 2020. The net loss for the year ended
December 31, 2020 of $6.5 million was further increased by a $26.2 million decrease in contracts liability and a
$4.9 million increase in inventories, which was partially offset by an increase of $2.3 million in accounts payable and
accruals, by $3.5 million amortization of debt issuance costs and debt discount, by a $3.1 million in share-based
compensation and by a $2.1 million decrease in accounts receivable and other assets. Net cash used in investing activities
for the year ended December 31, 2020 was $20.0 million and consisted primarily of an increase in bank deposits. On
February 17, 2021, we closed a public offering of our common stock raising gross proceeds of approximately $40.2 million
before deducting the underwriting discount and estimated expenses of the offering. In addition, to date, we have sold
shares of our common stock under our ATM program for aggregate gross proceeds equal to $13.8 million.

Future Funding Requirements

We expect to continue to incur significant expenditures in the near future as we increase our research and developments
efforts with respect to our product candidates. 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 efforts, combined with those of Chiesi, to commercialize PRX-102;

● the progress and results of our clinical trials, particularly the PRX-102 BALANCE study;

● our progress in commercializing BioManguinhos alfataliglicerase in Brazil;

● the duration and cost of discovery and preclinical development and laboratory testing and clinical trials for

our product candidates;

● 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,

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except with respect to the development-related payments and milestone payments that may become payable under the
Chiesi Agreements and under our agreement with SarcoMed. In addition, our ATM program provides us with a quick and
efficient manner to raise capital through the sale of shares of our common stock. To date, we have the right to raise an
additional $16.2 million of capital through sales of our common stock through the ATM program.

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, 2018, 2019 or 2020.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements as of December 31, 2019 and 2020.

Recently Issued Accounting Pronouncements

Certain recently issued accounting pronouncements are discussed in note 1r 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, 2020:

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

Less than
1 year
$ 4,344
$ 57,918
$ 4,085
$ 1,141
$ 4,272
$ 5,077

1‑3 years

3‑5 years

More
than 5
years

$ 444
$ 189
$ 224

$ 76,837

$ 857

$ 2,263
$ 2,263

Total
$ 4,344
$ 57,918
$ 4,085
$ 1,585
$ 4,461
$ 5,301
$ 2,263
$ 79,957

(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, 2020.

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 $4.9 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 U.S. dollar. Most of our
revenues and approximately 52% 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

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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 43% 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 period-end

Year Ended December 31,
2019
3.565
3.456

2020
3.442
3.215

2018
3.595
3.748

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,

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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, 2020, 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.

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.

Table of Contents

Attestation Report of Registered Public Accounting Firm

Not applicable.

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, 2020 that have materially affected, or that are
reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

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Item 10. Directors, Executive Officers and Corporate Governance

PART III

The information in our 2021 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 2021 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 2021 Proxy Statement under the heading “Security Ownership of Certain Beneficial
Owners and Management” is incorporated by reference in this section.

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

The information appearing in our 2021 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 2021 Proxy Statement under the heading “Ratification of Appointment of Independent
Registered Public Accounting Firm” is incorporated by reference in this section.

Table of Contents

Item 15. Exhibits and Financial Statement Schedules

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

PART IV

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, 2019 and 2020
Consolidated Statements of Operations for the years ended December 31, 2018, 2019 and 2020
Consolidated Statements of Changes in Capital Deficiency for the years ended December 31, 2018, 2019 and

2020

Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2019 and 2020
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

Exhibit Description

Certificate of Incorporation of the

Company

Incorporated by Reference
File
Number

Exhibit

Form
8-K 001-33357

3.1

Date
April 1, 2016

Filed
Herewith

3.2

Amendment to Certificate of

Def 14A 001-33357 Appen.

July 1, 2016

Incorporation of the Company

3.3

Second Amendment to Certificate of

Def 14A 001-33357 Appen.

Incorporation of the Company

October 17,
2018

3.4

Third Amendment to Certificate of
Incorporation of the Company

8-K 001-33357

3.1

December 20,

3.5

Bylaws of the Company

8-K 001-33357

3.2

2019

October 17,
2018

4.1†

Form of Restricted Stock

8-K 001-33357

4.1

July 18, 2012

4.2

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

4.1

December 7,
2016

4.3

Form of 7.50% Convertible Note due

8-K 001-33357

4.2

December 7,

2018 (Issued in Financing)

2016

4.5

4.6

4.7

4.8

4.9†

4.10

10.1

Table of Contents

4.4

Form of 7.50% Convertible Note due

8-K 001-33357

4.3

December 7,
2016

8-K 001-33357

4.2

July 25, 2017

8-K 001-33357

4.1

December 1,
2017

2018 (Issued in Exchange)

First Supplemental to Indenture, dated as
of July 24, 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

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

Description of Capital Stock

10-K 001-33357

4.7

March 12, 2020

Form of Warrant

8-K

001-33357

4.1

March 12, 2020

Form of Stock Option Agreement
(Executives)

Form of Stock Option Agreement
(Standard)

Lease Agreement between Protalix Ltd.
and Angel Science Park (99) Ltd., dated
as of October 28, 2003 as amended on
April 18, 2005

10-Q

001-33357

4.8

August 10, 2020

10-Q

001-33357

4.9

August 10, 2020

8-K 001-33357

10.9

January 8, 2007

10.2

Unprotected Lease Agreement

10-K 001-33357

10.21 March 17, 2008

10.3††

Amended and Restated Agreement

10-Q 001-33357

10.1

May 8, 2014

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

10.4††

Technology Transfer and Supply

10-Q 001-33357

10.3

May 8, 2014

Agreement made as of June 18, 2013 by
and between Protalix Ltd. and Fundação
Oswaldo Cruz

10.5††

Amended and Restated Exclusive

10-Q/A 001-33357

10.1

December 11,

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

2015

10.6

Form of Note Purchase Agreement,
dated of December 1, 2016 among

8-K

001-33357

10.1

December 7,
2016

Table of Contents

Protalix BioTherapeutics, Inc. and the
Purchasers

10.7

Form of Exchange Agreement, dated of

8-K 001-33357

10.2

10.8

10.9

December 1, 2016 among Protalix
BioTherapeutics, Inc. and the Existing
Holders

Form of U.S. Security Agreement, dated
of December 7, 2016 among Protalix
BioTherapeutics, Inc., the guarantors
party thereto and Wilmington Savings
Fund Society, FSB, as collateral agent

Form of Security Agreement/Debenture,
dated of December 7, 2016 between
Protalix BioTherapeutics, Inc. and
Altshuler Shaham Trusts Ltd., as security
trustee

8-K 001-33357

10.3

December 7,
2016

8-K 001-33357

10.4

December 7,
2016

10.10†† Exclusive License and Supply

10-K 001-33357

10.16 March 6, 2018

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

10.11†† Exclusive U.S. License and Supply

10-Q 001-33357

10.1

November 7,
2018

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

10.12†

10.13†

Employment Agreement made effective
as of May 20, 2019, by and between
Protalix Ltd. and Mr. Dror Bashan

Employment Agreement made effective
as of July 28, 2019, by and between
Protalix Ltd. and Mr. Eyal Rubin

8-K 001-33357

10.1

May 21, 2019

8-K 001-33357

10.1

July 29, 2019

10.14

Form of Securities Purchase Agreement

8-K

001-33357

10.1

March 12, 2020

10.15†

10.16†

10.17†

Amended and Restated Pro
BioTherapeutics, Inc. 2006 Stock
Incentive Plan

Employment Agreement with Yael
Hayon, Ph.D. dated June 7, 2020

Amended and Restated Employment
Agreement with Einat Brill Almon,
Ph.D., dated June 7, 2020

10-Q

001-33357

10.1

August 10, 2020

8-K

001-33357

10.1

June 8, 2020

8-K

001-33357

10.1

June 8, 2020

Table of Contents

10.18

ATM Equity OfferingSM Sales
Agreement, dated October 1, 2020,
between the Company and BofA
Securities, Inc.

8-K 001-33357

1.1

October 1, 2020

21.1

Subsidiaries

10-K 001-33357

21.1

February 26,
2010

23.1

31.1

31.2

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

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

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

18 U.S.C. Section 1350, as adopted

pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, Certification of
Chief Executive Officer

32.2

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 DOCUMENT - the

instance document does not appear in the
Interactive Data File because its XBRL
tags are embedded within the Inline
XBRL document

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

104

Cover Page Interactive Data File -
formatted in Inline XBRL and included
as Exhibit 101

Table of Contents

† Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to

participate.

†† 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.

Table of Contents

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 30, 2021.

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.

Signature

Title

Date

/s/ Dror Bashan

Dror Bashan

/s/ Eyal Rubin

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.

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

March 30, 2021

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

March 30, 2021

Chairman of the Board

March 30, 2021

Director

March 30, 2021

Director

March 30, 2021

Director

March 30, 2021

Director

March 30, 2021

Director

March 30, 2021

Table of Contents

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, 2019 and 2020
Consolidated Statements of Operations for the years ended December 31, 2018, 2019 and 2020
Consolidated Statements of Changes in Capital Deficiency for the years ended December 31, 2018, 2019 and
2020
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2019 and 2020
Notes to Consolidated Financial Statements

Page
F-2

F-4
F-5

F-6
F-7
F-9

F-1

Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Protalix Biotherapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Protalix BioTherapeutics, Inc. and its subsidiaries (the
“Company”) as of December 31, 2020 and 2019, 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, 2020, including the related notes
(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the
results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity
with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1q to the consolidated financial statements, the Company changed the manner in which it accounts
for leases in 2019.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements 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.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such
opinion.

Our audits 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. We believe that our audits provide a reasonable
basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective,
or complex judgments. The communication of critical audit matters does not

F-2

Table of Contents

alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating
the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to
which it relates.

Revenue Recognition - Estimated Costs to Complete License and Research and Development ("R&D") Services
Performance Obligation

As discussed in Notes 2 and 8 to the consolidated financial statements, $46.7 million of the Company’s total revenues for
the year ended December 31, 2020 was generated from license and R&D services. For the Company’s license and R&D
services, control transfers over time; accordingly, management recognizes revenue based on the extent of progress in each
period towards completion of the performance obligation. The selection of the measure of progress towards completion
requires management judgment and is based on the nature of the products or services to be provided. As disclosed by
management, the Company uses the cost-to-cost method to measure progress for its contracts because management
believes that measure best depicts the transfer of control to the customer, which occurs as the Company incurs costs on the
contracts.

Under the cost-to-cost method, the extent of progress towards completion is based on the ratio of costs incurred to date to
the total estimated costs at completion of the performance obligation, which includes both the actual costs already incurred
and the estimated costs to complete. Revenues are recognized proportionately as costs are incurred. Due to the nature of the
work required to be performed on the performance obligation, management’s estimation of costs at completion is complex
and requires significant judgment. Management has disclosed that there are many factors that can affect the accuracy of
cost estimates, including, but not limited to, the availability and costs of labor and materials resources, and productivity.

The principal considerations for our determination that performing procedures relating to revenue recognition – estimated
costs to complete license and R&D services performance obligation is a critical audit matter are the significant judgment
by management when developing the estimated costs to complete the performance obligation. This in turn led to significant
auditor judgment, subjectivity and effort in performing procedures to evaluate management's estimate of the costs to
complete the performance obligation.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included, among others, evaluating and testing
management’s process for determining the estimate of costs at completion, which included evaluating the reasonableness of
significant assumptions, including the estimated expected labor costs used by management and considering the factors that
can affect the accuracy of those estimates. Evaluating the reasonableness of significant assumptions used involved
assessing management’s ability to reasonably estimate costs to complete the performance obligation by (i) performing a
comparison of the originally estimated costs and actual costs incurred on similar completed contracts; (ii) evaluating the
timely identification of circumstances that may warrant a modification to the estimated costs to complete, including actual
costs in excess of estimates; and (iii) testing management’s process for evaluating the Company’s ability to properly
execute the work plan and design phases consistent with customer expectations for completing the performance obligation.

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

Tel Aviv, Israel

March 30, 2021

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

F-3

Table of Contents

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

ASSETS

December 31,

2019

2020

CURRENT ASSETS:

Cash and cash equivalents
Short-term bank deposits
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
Convertible notes
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

CAPITAL DEFICIENCY

Common Stock, $0.001 par value: Authorized - as of December 31, 2019 and 2020,
120,000,000 shares; issued and outstanding - as of December 31, 2019 and 2020,
14,838,213 and 34,765,280 shares, respectively

Additional paid-in capital
Accumulated deficit
Total capital deficiency
Total liabilities net of capital deficiency

$
$

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 $

18,265
20,280
2,000
2,096
13,082
55,723

1,799
4,845
5,567
67,934

7,221
13,926
1,420
5,394
54,427
4,086
86,474

-
1,716
2,263
4,467
51
8,497
94,971

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

35
320,280
(347,352)
(27,037)
67,934

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

F-4

Table of Contents

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, NET (1)

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

OPERATING INCOME (LOSS)

FINANCIAL EXPENSES

FINANCIAL INCOME

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 COMPUTING LOSS PER SHARE – BASIC AND DILUTED

(1)Includes deductible grants

2018

Year Ended December 31,
2019

8,978
25,262
34,240
(9,302)
(33,330)
(10,916)
(19,308)
(7,685)
536
(7,149)
(26,457)
(1.80)
14,713,518

$
$

15,866
38,827
54,693
(10,895)
(44,616)
(9,899)
(10,717)
(7,966)
407
(7,559)
(18,276)
(1.23)
14,838,213

$
$

2020

16,236
46,662
62,898
(10,873)
(38,167)
(11,148)
2,710
(9,671)
438
(9,233)
(6,523)
(0.22)
29,148,047

2,204

$
$

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

F-5

Table of Contents

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

Balance at January 1, 2018
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
Changes during 2020:
Issuance of common stock and warrants, net
Issuance of common stock under the Sales Agreement,
net
Share-based compensation related to stock options
Share-based compensation related to restricted stock
award
Exercise of warrants
Net loss
Balance at December 31, 2020

* Represents an amount less than $1.

Common
Stock
Number of
Shares

Common
Stock

Additional
Paid–In
Capital

Accumulated
Deficit

Total

Amount

14,372,880

$ 266,625

$ (296,096) $ (29,457)

2,990
200,997
261,346

*
*
1

498

16
1,369
1,149

14,838,213

$ 269,657

835

14,838,213

$ 270,492

17,604,423

41,325

1,428,571

694,073
200,000

1
*

4,866
2,264

861
472

34,765,280

$ 320,280

498

16
1,369
1,150
(26,457)
$ (322,553) $ (52,881)

(26,457)

835
(18,276)
$ (340,829) $ (70,322)

(18,276)

41,343

4,867
2,264

862
472
(6,523)
$ (347,352) $ (27,037)

(6,523)

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

F-6

Table of Contents

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, net (mainly exchange differences)
Changes in accrued liability for employee rights upon retirement

Gain on amounts funded in respect of employee rights upon retirement
Net loss in connection with conversions of convertible notes

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:

Increase in bank deposits
Purchase 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
Payment for promissory note
Proceeds from issuance of common stock and warrants, net
Proceeds from issuance of common stock under the Sales Agreement, net
Exercise of warrants
Net cash (used in) provided by financing activities
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS
NET INCREASE (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

Year Ended December 31,
2019

2020

2018

$ (26,457) $ (18,276) $

(6,523)

835
1,617
378
(10)
(58)

3,126
1,302
171
(494)
(28)

2,991

3,470

514
1,671
20
(18)
(46)
213
2,602

234

—

17,880
(3,099)

(26,205)
2,091
95
(4,927)
2,274
(458)
$ (7,742) $ (19,358) $ (26,106)

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

(736)
(761)
241

(686) $
62
33
(591) $

$ (4,752)

(627)
(259)
3

$ (20,000)
(655)
384
319
(883) $ (19,952)

(215)
41,343
4,867
472
$ 46,467

(270) $

(13,355)

225
(20,016)

64
473

51,163
$ 37,808

37,808
17,792

17,792
$ 18,265

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

F-7

Table of Contents

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

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

SUPPLEMENTARY DISCLOSURE ON CASH FLOWS

Interest paid
Interest received

Year Ended December 31,
2019

2020

2018

$
$

225
2,285

4,585
395

$
$

388

4,344
407

$
$

317

632

4,344
438

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

F-8

Table of Contents

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. (collectively, 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 most advanced investigational drug in the Company’s product pipeline is pegunigalsidase alfa, or PRX-
102, a therapeutic protein candidate for the treatment of Fabry disease, a rare, genetic lysosomal disorder. A
BLA for PRX-102 for the treatment of adult patients with Fabry disease was submitted to the U.S. Food and
Drug Administration (the “FDA”) on May 27, 2020 under the FDA’s Accelerated Approval pathway. On
August 11, 2020, the Company, together with its development and commercialization partner for PRX-102,
Chiesi Farmaceutici S.p.A. (“Chiesi”), announced that the FDA had accepted the BLA and granted Priority
Review designation for PRX-102 for the proposed treatment of adult patients with Fabry disease. The FDA
also indicated in the BLA filing communication letter that it is not currently planning to hold an advisory
committee meeting to discuss the application. Currently, the action date for the BLA under the Prescription
Drug User Fee Act (PDUFA) is April 27, 2021.

In addition to PRX-102, the Company’s product pipeline currently includes, among other candidates:

(1) alidornase alfa, or PRX-110, a proprietary plant cell recombinant human Deoxyribonuclease 1, or
DNase, which is subject to an exclusive worldwide license agreement with SarcoMed USA, Inc.
(“SarcoMed”) for use in the treatment of any human respiratory disease or condition including, but not
limited to, sarcoidosis, pulmonary fibrosis, and other related diseases via inhaled delivery;

(2) PRX-115, the Company’s plant cell-expressed recombinant PEGylated Uricase (Urate Oxidase) – a

chemically modified enzyme to treat refractory gout; and

(3) PRX-119, the Company’s plant cell-expressed PEGylated recombinant human DNase I product
candidate being designed to elongate half-life in the circulation for NETs-related diseases.

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 February 17, 2021, the Company closed a public offering of its common stock, par value $0.001 per share
(the “Common Stock”), raising gross proceeds of approximately $40.2 million at a price equal to $4.60 per
share, before deducting the underwriting discount and estimated expenses of the offering. BofA Securities
acted as book-running manager for the offering with Oppenheimer & Co. acting as co-manager.

On October 1, 2020, the Company entered into an ATM Equity OfferingSM Sales Agreement (the “Sales
Agreement”) with BofA Securities, Inc., as the Company’s sales agent (the “Agent”). Pursuant to the terms of
the Sales Agreement, the Company may sell from time to time through the Agent shares of Common Stock
having an aggregate offering price of up to $30 million (the “ATM Shares”). As of December 31,

F-9

Table of Contents

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2020, the Company sold 1,428,571 ATM Shares for gross proceeds of $5 million. During 2021 to date, the
Company sold 1,867,552 ATM Shares for gross proceeds of $8.8 million.

On March 18, 2020, the Company completed a private placement of its common stock and warrants. In
connection with the offering, the Company issued 17,604,423 unregistered shares of Common Stock at a
purchase price per share of $2.485 and warrants to purchase an additional 17,604,423 shares of Common
Stock at an exercise price of $2.36 per share. The warrants were exercisable commencing six months
following their issuance for a period of five years from the date of issuance. For accounting purposes, the
warrants are classified as equity considering the warrants’ terms. The net proceeds generated from the private
placement were approximately $41.3 million, after deducting advisory fees and other estimated offering
expenses.

On October 19, 2017, Protalix Ltd. and Chiesi entered into an Exclusive License and Supply Agreement (the
“Chiesi Ex-US Agreement”) pursuant to which Protalix Ltd. granted to Chiesi 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, 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, and to receive additional payments of up
to a maximum of $760.0 million, in the aggregate, in regulatory and commercial milestone payments. To
date, Protalix Ltd. has received the complete amount of development costs to which it is entitled under the
Chiesi Agreements.

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

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

time, continuing to supply BioManguinhos alfataliglicerase to Fiocruz under the Brazil Agreement, and
patients continue to be treated with BioManguinhos alfataliglicerase in Brazil.

COVID-19, which was declared by the World Health Organization to be a global pandemic on March 11,
2020, has had numerous adverse effects on the global economy. To date, the Company's clinical trials have
not been adversely affected by COVID-19, although certain practices the Company has adopted in its offices
and facilities in an effort to promote social distancing have resulted in minor delays in the performance of
administrative activities outside of the clinical programs. We continue to face uncertainty as to the degree and
duration of that impact going forward. The Company does not know the length of time that the pandemic and
related disruptions will continue, the impact of governmental regulations or easement of regulations in
response to the strengthening or weakening of the pandemic, or the degree of overall potentially permanent
changes in consumer behavior that may be caused by the pandemic.

The Company believes that its cash and cash equivalents and bank deposits as of December 31, 2020
combined with the cash the Company raised from the public offering performed in February 2021 and from
the sale of ATM Shares subsequent to December 31, 2020 (collectively “Available Funds”) are sufficient to
satisfy the Company’s capital needs for at least 12 months from the date that these financial statements are
issued. The Company expects that the Available Funds will be sufficient to satisfy the full payment of the
principal amount of the Company’s outstanding 7.5% convertible secured promissory notes due
November 15, 2021 (the “2021 Notes”), equal to $57.9 million, unless the notes are refinanced, restructured
or converted before that date.

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. As applicable to these
consolidated financial statements, the most significant estimates relate to revenue recognition.

The severity, magnitude and duration, as well as the economic consequences, of the COVID-19 pandemic, are
uncertain, rapidly changing and difficult to predict. As a result, the accounting estimates and assumptions
may change over time in response to COVID-19.

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
translation gains and losses are recorded as financial income or expenses, as appropriate.

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

f. Accounts Receivables

The Company’s accounts receivables accounting policy until December 31, 2019, prior to the adoption of
the new CECL standard

Accounts receivables are stated at their net realizable value. The allowance against gross accounts
receivables reflects the best estimate of losses inherent in the receivables portfolio determined on the basis
of historical experience, specific allowances for known troubled accounts and other currently available
information. An allowance for doubtful debts is reflected in net accounts receivables. Accounts receivables
are written-off after all reasonable means to collect the full amount have been exhausted.

The Company’s accounts receivables accounting policy from January 1, 2020, following the adoption of the
new CECL standard

Accounts receivable have been reduced by an allowance for doubtful accounts. The Company maintains the
allowance for estimated losses resulting from the inability of the Company’s customers to make required
payments. The allowance represents the current estimate of lifetime expected credit losses over the
remaining duration of existing accounts receivable considering current market conditions and supportable
forecasts when appropriate. The estimate is a result of the Company’s ongoing evaluation of collectability,
customer creditworthiness, historical levels of credit losses, and future expectations.

No write-off activity and recoveries for the periods presented were recognized.

g. 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.

h. 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

Years

5
10-15
3

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Leasehold improvements are amortized by the straight-line method over the shorter of (i) the expected lease
term and (ii) the estimated useful life of the improvements.

i. 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.

j. 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 26% and 23%.

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.

k. Revenue Recognition

The Company accounts for revenue pursuant to Accounting Standards Codification, Topic 606, Revenue from
Contracts with Customers (“ASC 606”). Under ASC 606, 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).

2. Revenues from Chiesi Agreements

The Company has 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.

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 the 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.

3. Revenue from R&D services

Revenue from the research and development services is recognized over time using the cost-to-cost
method since the customer benefits from the research and development services as the entity performs
the service.

l. 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”) 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.

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

m. 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’s deposits are 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 its customers. The Company does not require its customers to post collateral with respect to
receivables.

n. Share-based compensation

The Company accounts for share-based payment awards classified as equity awards, including stock-based
option awards and restricted stock units, 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 calculates the fair value of stock-based option awards on the date of grant using the Black-
Scholes option pricing model. This option pricing model requires estimates as to the option’s expected term
and the price volatility of the underlying stock.

The Company measures compensation expense for the restricted stock units based on the market value of the
underlying stock at the date of grant.

The Company elected to recognize compensation cost for awards to employees with only service conditions
that has a graded vesting schedule using the accelerated method based on the multiple-option award approach.
Options granted to consultants and other service providers are recognized over the related service period
using the straight-line method.

The Company elects to account for forfeitures as they occur.

o. 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 7,458,380, 7,838,120 and
22,850,682 shares of Common Stock underlying outstanding options, warrants and convertible notes for the
fiscal years ended December 31, 2018, 2019 and 2020, 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).

p. Convertible notes

The 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.

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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, 2020, a total of $57.9 million aggregate principal amount of the 2021 Notes were
outstanding. In addition, as of December 31, 2020, none of the 2018 Notes were outstanding.

q. Leases

The Company’s lease accounting policy until December 31, 2018, prior to the adoption of the new lease
standard

The Company leases real estate and automobiles for use in its operations, which are classified as operating
leases. Rental expense for the year ended December 31, 2018 was $1.4 million.

The Company’s lease accounting policy from January 1, 2019, following the adoption of the new lease
standard

The Company adopted the new lease accounting guidance on January 1, 2019, using a modified retrospective
transition approach, with certain practical expedients, and as a result did not adjust prior periods. The
Company recognized right-of-use assets of $5.7 million and $5.6 million and lease liabilities of $5.7 million
and $5.9 million for its operating leases as of December 31, 2019 and 2020, respectively. The Company does
not have any finance leases.

Leases are classified as finance or operating, with classification affecting the pattern and classification of
expense recognition in the statement of operations. 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 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 the adoption of the standard 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.

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lease terms 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.

r. Recently adopted standards

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13 “Financial Instruments -
Credit Losses - Measurement of Credit Losses on Financial Instruments.” This guidance replaces the current
incurred loss impairment methodology with a methodology that reflects expected credit losses and requires
consideration of a broader range of reasonable and supportable information to inform credit loss estimates.
Upon adoption of the standard, there was no immediate impact to the Company’s financial position, results of
operations or cash flows. On an ongoing basis, the Company will contemplate forward-looking economic
conditions in recording lifetime expected credit losses for the Company’s financial assets measured at cost,
such as the Company’s trade receivables.

In November 2018, the FASB issued ASU 2018-18 “Collaborative Arrangements (Topic 808) - Clarifying the
interaction between Topic 808 and Topic 606.” The amendments provide guidance on whether certain
transactions between collaborative arrangement participants should be accounted for as revenue under
ASC 606. It also specifically (i) addresses when the participant should be considered a customer in the
context of a unit of account, (ii) adds unit-of-account guidance in ASC 808 to align with guidance in
ASC 606 and (iii) precludes presenting revenue from a collaborative arrangement together with revenue
recognized under ASC 606 if the collaborative arrangement participant is not a customer. The Company
adopted the provisions of this update as of January 1, 2020 with no material impact on its consolidated
financial statements.

NOTE 2 - COMMERCIALIZATION AGREEMENTS

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.

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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. In September
2020, the Company amended the outstanding $4.3 million promissory note payable to Pfizer by
November 2020 to extend the maturity date to the earlier of (a) January 31, 2022 and (b) the date that the
Company receives any milestone payment from Chiesi, if at all, subject to certain conditions and
exceptions. The amendment also provides that the Company shall make a payment of $430,000 to Pfizer.
The payment is creditable against the principal amount of the note, in whole or in part, if the Company
satisfies the note in full on or prior to September 30, 2021, depending on the date the note is satisfied. As
of December 31, 2019, the promissory note was presented in “other long term liabilities.” As of
December 31, 2020, the promissory note was classified to current liabilities.

2. 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).

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.

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 2020, 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 $45.0 million in consideration for development services performed.

c. Payments equal to approximately $21.1 million in connection with the performance of extension

studies.

During 2019 and 2020, the Company recognized revenues of approximately $4.5 million and
$3.5 million, respectively, 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 judgment, the milestone payment is expected to be received in the first half of 2021.

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

4. On March 16, 2020, the Company agreed to conduct a feasibility study with Kirin Holdings Company,
Limited (“Kirin”) to evaluate the production of a novel complex protein utilizing ProCellEx®, the
Company’s proprietary plant cell-based protein expression system. Kirin will bear the costs of
conducting cell line engineering and protein expression studies on the target protein. In addition, the
contract provides Kirin with an option to a future service for which the Company received a non-
refundable payment in the amount of $1.0 million. This amount is presented under “contract

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

liabilities.” The Company will recognize such amount as revenues when the aforementioned future
services are performed or when the option expires.

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

Less – accumulated depreciation and amortization

December 31,

2019
$ 16,849
2,636
16,492
$ 35,977
(30,704)
5,273
$

2020
$ 17,422
2,687
16,659
$ 36,768
(31,923)
4,845
$

b. Depreciation in respect of property and equipment totaled approximately $1.7 million, $1.6 million and

$1.3 million for the years ended December 31, 2018, 2019 and 2020, respectively.

NOTE 4 - INVENTORIES

Inventories at December 31, 2019 and 2020 consisted of the following:

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

December 31,
2020

2019

3,607
552
3,996
8,155

3,347
2,887
6,848
$ 13,082

b. During the years ended December 31, 2018, 2019 and 2020, the Company recorded approximately

$1.1 million, $0.5 million and $0.3 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, 2018, 2019 and 2020, the Company deposited approximately $145,000, $143,000 and $121,000,
respectively, with insurance companies in connection with its severance payment obligations.

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 $781,000, $784,000 and $885,000 for each of
the years ended December 31, 2018, 2019 and 2020, respectively, of which approximately $620,000, $642,000
and $747,000 in the years ended December 31, 2018, 2019 and 2020, respectively, were in respect of the
Contribution Plans. Gain on amounts funded in respect of employee rights upon retirement totaled approximately
$46,000, $58,000 and $28,000 for the years ended December 31, 2018, 2019 and 2020, respectively.

The Company expects to contribute approximately $975,000 in the year ending December 31, 2021 to insurance
companies in connection with its severance liabilities for its operations for that year, approximately $864,000 of
which will be contributed to one or more Contribution Plans.

During the five-year period following December 31, 2020, 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 $73,000.

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 $1.6 million, $1.4 million and $911,000 during the years ended
December 31, 2018, 2019 and 2020, respectively.

At December 31, 2019 and 2020, the maximum total royalty amount payable by the Company under these
funding arrangements is approximately $40.8 million and $39.8 million, respectively (without interest,
assuming 100% of the funds are payable).

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 2020, total commitments under said agreements were approximately
$5.3 million.

NOTE 7 - OPERATING LEASES

The Company is a party to several 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, 2020, the Company provided bank guarantees of
approximately $464,000, in the aggregate, to secure the fulfillment of its obligations under the lease
agreements.

The Company entered into several three-year leases for vehicles which are regularly amended as new vehicles
are leased.

The following table sets forth data regarding the Company’s operating leases for the year ended
December 31, 2019 and 2020:

(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
10.5
12.7 %

2020
$ 1,382
1,289
9.5
12.7 %

The following table sets forth a maturity analysis of the Company’s operating lease liabilities as of
December 31, 2020:

(U.S. dollars in thousands)
2021
2022
2023
2024
2025 and thereafter
Total undiscounted cash flows
Less: imputed interest
Present value of operating lease liabilities

F-22

December 31, 2020
1,233
1,111
927
838
6,222
10,331
4,444
5,887

$
$
$
$
$
$
$
$

Table of Contents

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - REVENUE

The following table summarizes the Company’s disaggregation of revenues:

(U.S. dollars in thousands)
Pfizer
Brazil
Chiesi
Total revenues from selling goods
Revenues from license and R&D services

$
$

Year Ended December 31,
2019
6,722
9,144
-
$ 15,866
$ 38,827

2020
8,105
$
8,000
$
$
131
$ 16,236
$ 46,662

2018
5,320
3,658
-
$
8,978
$ 25,262

During the year ended December 31, 2020, the Company recorded revenue in the amount of $12.8 million
following a change in estimate of the total costs expected to be incurred in the connection with the Chiesi
Agreements.

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.

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 5,725,171 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, 2020, 1,493,626 shares of Common Stock remain available for grant under the Plan.

F-23

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 2018 through December 31, 2020, the Company granted options and shares of restricted
stock to certain employees and non-employees as follows:

1. Options and restricted stock units granted to employees:

a) Below is a table summarizing all of the options and restricted stock grants to employees during the

three years ended December 31, 2020:

No. of
options or
restricted
stock
granted
400,000
236,000
160,000
80,000
196,995
760,311
129,771
694,073
122,656

$
$
$
$
$
$
$
$
$

Exercise
price

Vesting
period

5.60
5.10
4.69
2.00
3.59
3.66
3.73
n/a
3.59

4 years
4 years
4 years
4 years
4 years
4 years
4 years
4 years
4 years

Fair value
at grant
(U.S. dollars
in thousands)
1,196
$
729
$
449
$
97
$
482
$
1,893
$
$
329
$
$

2,492
299

Expiration
period
10 years
10 years
10 years
10 years
10 years
10 years
10 years
10 years
10 years

Year of grant

2018
2018
2019
2019
2020
2020
2020
2020
2020

Set forth below are grants made by the Company to employees (including related parties) during the
three-year period ended December 31, 2020 (a portion of such grants appear in the table above):

On September 13, 2018, the Company granted 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.

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

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

On August 11, 2020, the Company granted the following:

447,927 shares of restricted Common Stock to its President and Chief Executive Officer under
the Plan. The restricted shares vest over a four-year period in 16 equal quarterly increments and
are subject to automatic 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 restricted stock on the date of grant to be approximately $1.6 million.

II. 246,146 shares of restricted Common Stock to its Sr. Vice President, Chief Financial Officer

under the Plan. Of the shares, 27,855 shares vested on September 22, 2020. The remaining
218,291 of the shares vest in 16 equal, quarterly increments over a four-year period,
commencing upon the date of grant and are subject to automatic 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 restricted stock on the date of grant to
be approximately $900,000.

III. 10-year options to purchase 122,656 shares of Common Stock to the Company’s Sr. Vice

President, Operations under the Plan. The options have an exercise price equal to $3.59 per
share and vest over a four-year period in 16 equal quarterly increments. Vesting of the options
granted to the Sr. Vice President, Operations are subject to automatic acceleration in full upon a
Corporate Transaction or a Change in Control, and are subject to certain other terms and
conditions. The Company’s President and Chief Executive Officer may, in his discretion, grant
options to the Company’s Sr. Vice President, Operations to purchase additional shares if the
Company effects certain transactions in which it issues additional shares of Common Stock. The
Company estimated the fair value of the options on the date of grant using the Black-Scholes
option-pricing model to be approximately $300,000 based on the following weighted average
assumptions: share price equal to $3.59; dividend yield of 0% for all years; expected volatility
of 80.51%; risk-free interest rate of 0.365%; and expected life of six years.

On July 5, 2020, the Company granted 10-year options to purchase 129,771 shares of Common
Stock to the Company’s new Vice President, Research and Development under the Plan. The options
have an exercise price equal to $3.73 per share and vest over a four-year period in 16 equal quarterly
increments. Vesting of the options granted to the Vice President, Research and Development is
subject to automatic 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

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Black-Scholes option-pricing model to be approximately $329,000 based on the following weighted
average assumptions: share price equal to $3.73; dividend yield of 0% for all years; expected
volatility of 80.60%; risk-free interest rate of 0.395%; and expected life of six years.

On June 7, 2020, the Company granted the following:

10-year options to purchase 196,995 shares of Common Stock to the Company’s Sr. Vice
President and Chief Development Officer under the Plan. The options have an exercise price
equal to $3.59 per share and vest over a four-year period in 16 equal quarterly increments.
Vesting of the options granted to the Sr. Vice President and Chief Development Officer are
subject to automatic 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’s President and Chief Executive Officer may, in his discretion, grant options to the
Company’s Sr. Vice President and Chief Development Officer to purchase additional shares if
the Company effects certain transactions in which it issues additional shares of Common Stock.
The Company estimated the fair value of the options on the date of grant using the Black-
Scholes option-pricing model to be approximately $500,000 based on the following weighted
average assumptions: share price equal to $3.59; dividend yield of 0% for all years; expected
volatility of 80.43%; risk-free interest rate of 0.59%; and expected life of six years.

II. 10-year options to purchase 760,311 shares of Common Stock, in the aggregate, to certain of the
Company’s employees under the Plan. The options granted have an exercise price equal to
$3.66 per share and vest over a four-year period in 16 equal quarterly increments. 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 $3.66; dividend yield of 0% for all years; expected volatility
of 80.49%; risk-free interest rate of 0.45%; and expected life of six years.

b) The total unrecognized compensation cost of employee stock options at December 31, 2020 is
approximately $4.2 million. The unrecognized compensation cost of employee stock options is
expected to be recognized over a weighted average period of 1.1 years.

During the three years ended December 31, 2020, 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. Options granted to directors:

On February 3, 2020, the Company granted 10-year options to purchase 240,000 shares of Common
Stock to the Chairman of the Company’s Board of Directors under the Plan. The options have an exercise
price equal to $3.70 per share and vest over a four-year period in 16 equal quarterly increments. Vesting
of the options granted to the Chairman of the Board is subject to automatic 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 $593,000 based on the
following weighted average assumptions: share price equal to $3.70; dividend yield of 0% for all years;
expected volatility of 76.91%; risk-free interest rate of 1.4%; and expected life of six years.

On January 20, 2020, the Company granted 10-year options to purchase a total of 200,000 shares of
Common Stock to five of the Company’s independent directors under the Plan. The options have an

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

exercise price equal to $3.55 per share and vest over a four-year period in 16 equal quarterly increments.
Vesting of the options granted to the directors is subject to automatic 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 $475,000 based on the
following weighted average assumptions: share price equal to $3.55; dividend yield of 0% for all years;
expected volatility of 76.62%; risk-free interest rate of 1.685%; and expected life of six years.

3. A summary of share option plans, and related information, under all of the Company’s equity incentive

plans for the years ended December 31, 2018, 2019 and 2020 is as follows:

a) Options granted to employees:

2018

Year Ended December 31,
2019

2020

Number
of
options
472,962

Weighted
average
exercise
price

36.04

Number
of
options
1,000,068

Weighted
average
exercise
price

15.47

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

$
$

Number
of
options
1,040,197

1,209,733
162,655
2,087,275
702,889

Weighted
average
exercise
price

13.03

3.65
37.92
5.66
9.24

$
$

Outstanding at beginning of year
Changes during the year:

Granted
Forfeited and Expired
Outstanding at end of year
Exercisable at end of year

b) Restricted stock granted to employees:

Outstanding at beginning of year
Changes during the year:

Granted
Vested

Non vested at end of year

Year Ended December 31, 2020
Number of Restricted Stock
-

694,073
69,493
624,580

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

c) Options granted to consultants, directors, and other service providers:

2018

Year Ended December 31,
2019

2020

Weighted

Weighted
Number average Number average Number average
exercise
price

exercise
price

of
options

Weighted

of
options
15,000 $

of
options
20,000 $

32.82 15,000 $

33.70

Outstanding at beginning of year
Changes during the year:
Granted
Expired
Outstanding at end of year
Exercisable at end of year

d) Warrants issued to stockholders:

Outstanding at beginning of year
Changes during the year:
Granted
Exercised
Outstanding at end of year

5,000
15,000
15,000 $

30.20
33.70 15,000
33.70 15,000 $

15,000
33.70 464,375
33.70 106,875 $

464,375

Year Ended December 31, 2020
Number of
warrants
-

Exercise price

17,604,423
200,000
17,404,423

$
$
$

2.36
2.36
2.36

33.70

3.74
33.70
3.74
4.08

e) The following tables summarize information concerning outstanding and exercisable options as of

December 31, 2020:

December 31, 2020

Options exercisable

Weighted
average
remaining
contractual
life

Options outstanding
Number of Weighted

options
outstanding
at end of
year
80,000

200,000
319,651
760,311
240,000
129,771
160,000
225,342
225,625
120,950
90,000

average
remaining
contractual
life

8.73
9.06
9.51
9.47
9.10
9.52
8.50
7.68
4.74
3.34
0.83

Exercise
prices
$2.00
$3.55
$3.59
$3.66
$3.70
$3.73
$4.69
$5.10
$5.60
$17.20
$23.70

Number of
options
exercisable
25,000
37,500
32,290
95,039
45,000
8,111
60,000
127,124
168,750
120,950
90,000

8.73
9.06
9.48
9.47
9.10
9.52
8.50
7.66
3.74
3.34
0.83

2,551,650

809,764

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

f) 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

d. Private and 144A Offerings

Year Ended December 31,
2018 2019 2020

310
204
514

$ 513
322
$ 835

$ 1,036
2,090
$ 3,126

1. 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.

2. On March 18, 2020, the Company completed a private placement to certain existing and new institutional
and other accredited investors (the “Purchasers”) in reliance on the exemption from registration set forth
in Section 4(2) of the Securities Act. The Company sold approximately 17.6 million unregistered shares
of Common Stock to the Purchasers at a price per share of $2.485. The Company generated 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 at an exercise price equal
to $2.36. On September 14, 2020, the Company issued 200,000 shares of Common Stock in connection
with the cash exercise of a warrant issued in the transaction. The Company generated proceeds equal to
$472,000 from the exercise of the warrant.

e. At-the-Market (ATM) Offering

On October 1, 2020, the Company entered into the Sales Agreement with the Agent. Pursuant to the terms of
the Sales Agreement, the Company may sell from time to time through the Agent ATM Shares having an
aggregate offering price of up to $30 million.

The Company has no obligation to sell any of the Shares, and may at any time suspend sales under the Sales
Agreement or terminate the Sales Agreement in accordance with its terms. The Agent is entitled to a
commission of up to 3.0% of the aggregate gross proceeds from the ATM Shares sold. As of December 31,
2020, the Company sold 1,428,571 ATM Shares under the Sales Agreement for gross proceeds of
approximately $5.0 million.

NOTE 10 - CONVERTIBLE NOTES

a. 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 convertible notes due 2022. 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.

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth total interest expense recognized for the years ended December 31, 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,
2018

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. 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.

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.

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Prior to the maturity date, the Company may redeem in cash:

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

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 2019 and 2020.

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-31

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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
Interest payment in connection with conversions
Loss in connection with conversions
Other expenses
Total

NOTE 11 - FAIR VALUE MEASUREMENT

Year Ended December 31,
2018 2019 2020
$ 4,344
3,470

$ 4,344
2,991

$ 4,359
2,587
234
245

$ 7,425

$ 7,335

1,300
$ 9,114

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.

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 outstanding $57.9 million 2021 Notes as of December 31, 2020 is approximately
$58.7 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,
2020. 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

F-32

2021 Notes
3.63
0.87
0.10 %
75.84 %
10.44 %

Table of Contents

PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 2019-
2022 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.

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.

The corporate tax rate was 23% for 2018 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

F-33

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

F-34

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

c. Tax losses carried forward to future years

As of December 31, 2020 and 2019, the Company had aggregate net operating loss (“NOL”) carry-forwards
equal to approximately $231.4 million and $213.1 million, respectively, that are available to reduce future
taxable income as follows:

1. The Company

The Company’s carry-forward NOLs, equal to approximately $30.9 million and $29.0 million as of
December 31, 2020 and 2019, respectively, 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, 2020 and 2019, the Israeli Subsidiary had approximately $200.5 million and
$184.1 million, respectively, 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, 2019 and 2020 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,

2019

2020

9,247
25
50,236
(59,508)
-

9,598
40
54,122
(63,760)
-

Deferred taxes are computed using the tax rates expected to be in effect when those differences reverse.

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, 2020, all of Protalix Ltd.’s tax
assessments through tax year 2015 are considered final.

F-35

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of open tax years by major jurisdiction is presented below:

Jurisdiction:
Israel
United States (*)

Years:
2016-2020
2017-2020

(*) 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 deposits
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

December 31,
2019 2020

604
26
820
314
68
$ 1,832

771

436
841
48
$ 2,096

December 31,
2020

2019

$ 1,381
555
1,754
7,360
757
98
$ 11,905

$ 1,460
555
1,526
9,586
482
317
$ 13,926

NOTE 14 - RELATED PARTY TRANSACTIONS

(U.S. dollars in thousands)
Compensation (including share-based compensation) to the non-
executive directors

Year Ended December 31,
2018 2019 2020

467

444

$ 814

NOTE 15 - SUBSEQUENT EVENTS

1. Since January 1, 2021, the Company has sold 1,867,552 shares of Common Stock under the Sales

Agreement. The Company generated gross proceeds equal to approximately $8.8 million in connection with
such sales.

2. On February 10, 2021, the Company entered into an exclusive worldwide license agreement with SarcoMed

with respect to PRX-110 for use in the treatment

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PROTALIX BIOTHERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of any human respiratory disease or condition including, but not limited to, sarcoidosis, pulmonary fibrosis,
and other related diseases via inhaled delivery. Under the terms of the agreement, SarcoMed will be
responsible for the identification and selection of pharmaceutical candidates under the license, and the clinical
research and development of such candidates. The Company is entitled to an initial cash payment of
$3.5 million, subject to certain conditions, and to additional regulatory and commercial milestone payments
and tiered royalties on net sales of products that are commercialized under the license agreement. In addition
to the foregoing, the parties agreed to commence negotiation of clinical and commercial supply agreements
for alidornase alfa. As part of the arrangement, the parties agreed to negotiate and sign a supply agreement
within 60 days of the execution of the license agreement, and SarcoMed has the right to terminate the license
agreement if the parties do not successfully do so.

3. On February 17, 2021, the Company issued and sold 8,749,999 shares of Common Stock in an underwritten
public offering at a price to the public of $4.60 per share for gross proceeds of approximately $40.2 million
before deducting the underwriting discount and estimated expenses of the offering. The above included the
exercise of the underwriters’ over-allotment option to purchase 1,141,304 shares of Common Stock.

F-37

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 333-237736)
and on Form S-8 (No. 333-148983, No. 333-182677, No. 333-203960, No. 333-225526 and No. 333-239101) of Protalix
BioTherapeutics, Inc. of our report dated March 30, 2021 relating to the financial statements, 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 30, 2021

EXHIBIT 31.1

I, Dror Bashan, certify that:

1. 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) 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;

(b) 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;

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

(d) 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 30, 2021

/s/ Dror Bashan
Dror Bashan
President and Chief Executive Officer

EXHIBIT 31.2

I, Eyal Rubin, certify that:

1. 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;