What are Yew Bio Pharm Group Inc's Business Segments?
Traditional Chinese Medicine
There is a long-established, scientifically recognized relationship between the
Pacific yew, taxus brevifolia , and similar species of yew (including the Northeast
yew), and certain cancer drugs, most notably paclitaxel, also known as taxol.
Paclitaxel is a broad-spectrum mitotic inhibitor used in cancer chemotherapy.
It was discovered in a U.S. National Cancer Institute program at the Research
Triangle Institute in 1967 when Monroe E. Wall and Mansukh C. Wani isolated it
from the bark of the Pacific yew tree and named it taxol. Taxol is found in the
root, stem, leaf, seed and bark of the taxus family of trees, including the Pacific
and Northeast yews. It was developed commercially by Bristol-Myers Squibb under
the brand name Taxol®. The PRC State Food and Drug Administration, or the
SFDA, approved a new drug certification for taxol in 1995.
The improvement on the extraction and isolation technology of the biological properties
of taxol made it a breakthrough in the treatment of cancer in the 1990s, providing
a non-intrusive alternative to the more radical techniques of radiotherapy and
surgery. Taxol is used to treat patients with lung, ovarian, breast, head and
neck cancer, and advanced forms of Kaposi’s sarcoma.
Taxol, derived from certain species of yew tree including the Northeast yew tree,
is a taxane drug and mitotic inhibitor that is used to treat cancer. All cells
grow by a process called mitosis (cell division). Taxol targets rapidly growing
cancer cells, sticks to them while they are trying to divide and prevents them
from completing the division process. Since the cancer cells cannot divide into
new cells, they cannot grow and the cancer cannot metastasize. Taxol may suppress
tumor growth through regulating microtubule stabilization, inducing apoptosis
and adjusting immunologic mechanism. Taxol can promote the polymerization of microtubule
and inhibit their degradation, through which taxol can block cell division in
the G2/M stage and induce apoptosis of tumor cells.
Taxol is a clear, colorless fluid that is given intravenously as a chemotherapy
injection or as an infusion pumped from a dose bag. Taxol can be administered
as high-dose chemotherapy, once every two or three weeks, or in low doses on a
weekly basis. In the treatment of certain soft tissue cancers, such as breast
cancer, taxol is given for early stage and metastatic breast cancer after combination
anthracycline and cytoxan therapy and is also given as neoadjuvant treatment to
shrink a tumor before surgery. Taxol can also be used together with a drug called
Cisplatin to treat advanced ovarian cancer and non-small cell lung cancer, or
NSCLC. The U.S. Food and Drug Administration has approved taxol as the primary
and secondary treatment for NSCLC. There are other generally accepted protocols
for the use of taxol as a cancer drug alone or in combination with other drugs
depending upon the diagnosis, staging and type of cancer, as well as a patient’s
medical history, tolerances and allergies, among other relevant factors.
The Chinese Herbal Medicine Standard (manual) of Heilogjiang Province (2011 version),
edited by the HFDA, states that the Northeast yew has a secondary effect on treating
cancer, meaning that while it has an impact on treating cancer, yew tree extract
by itself (as distinguished from processed taxol) cannot be used as a stand-alone
treatment of cancer. While the TCM raw material we sell contains taxol naturally,
the companies to whom we sell such raw materials do not extract taxol from our
TCM raw materials to produce pharmaceutical taxol.
Certain species of yew trees are the only natural source of taxol. Initially,
taxol was extracted from the bark of the yew tree, but harvesting the bark usually
kills the tree. Moreover, taxol is extracted from the bark of yew trees in extremely
small amounts, often requiring the destruction of several yew trees to extract
enough taxol to treat a single patient. Accordingly, taxol extracted from the
yew is both very expensive and environmentally harmful. Because of environmental
concerns about the adverse impact on forests in the Pacific Northwest in the United
States, by the 1990s taxol ceased being derived from the bark of the Pacific yew.
Alternative ways to develop taxol from renewable resources is ongoing. These include
taxol-producing fungi from the yew tree and using other parts of the yew tree
that may contain taxol.
We believe using yew trees that have been grown using our Asexual Reproduction
Method significantly shortens the maturity cycle of naturally-grown yew trees
and allows earlier commercialization of yew trees as a source of taxol. We further
believes that using the branches and leaves of yew trees in large quantities,
as we do, provides the key to solving the need for additional sources of taxol
while not further endangering the PRC’s natural supply of yew trees, which
themselves were over-forested in previous decades since the discovery of taxol.
The founder and President of our company, Zhiguo Wang, with the support of the
Ministry of Forest and Science, and the Technology Department of Heilongjiang
Province, successfully completed a project from 1984 to 1995 for asexual reproduction
of the Northeast yew, and developed the first artificial cloned yew forest in
the world. Tests conducted by the Ministry of Education’s Key Laboratory
of Forest Plant Ecology in Northeast Forestry University have shown that the growing
cycle of a cloned yew is significantly shorter than that of a natural yew and
the concentration is taxol is higher. In 1995, this project received the Second
Scientific and Technological Progress Award of Heilongjiang Province.
In December 2009, Yew Pharmaceutical received authorization from HFDA approving
the sale of a yew-based TCM as a secondary treatment of cancer and certain other
disorders, including uric disorders, certain liver diseases and menstrual discomfort.
This TCM, sold under the brand name Zi Shan , has been approved to be sold under
both prescription and over-the-counter drug categories. We also believe that Zi
Shan may provide general beneficial effects on overall health. According to the
Quintessence of Materia Medica, published in August 2006 by the Chinese Academy
of Medical Sciences - Institute of Medicinal Plants, the Northeast yew plays a
role as a diuretic, detumescence and in restoring menstrual flow. The approval
from HFDA allows Yew Pharmaceutical to sell Zi Shan throughout the PRC.
In November 2010, Yew Pharmaceutical applied to the SFDA to approve an upgrade
of Zi Shan from provincial to national standard, which we believe will enhance
its general market acceptance and therefore could create additional demand for
the raw materials we sell to Yew Pharmaceutical. As of the date of this report,
the application is pending.
We entered into a Cooperation and Development Agreement dated January 9, 2010,
or the Development Agreement, with Yew Pharmaceutical, a related party, for the
development, production and sale of yew-based TCM. Under the Development Agreement,
we sell yew branches and leaves to Yew Pharmaceutical. Yew Pharmaceutical manufactures
TCM at its own facilities in Harbin in accordance with the requirements of HFDA.
Yew Pharmaceutical is also responsible for producing the finished product in accordance
with good manufacturing practice, or GMP, requirements (in this regard, it received
a GMP certificate in November 2009), and filing all applications with and obtaining
all approvals from the HFDA.
Yew Pharmaceutical is the primary purchaser of the raw materials we sell in our
TCM raw materials business. Pursuant to the Development Agreement, Yew Pharmaceutical
pays us RMB1,000,000 per ton of raw material, whereas the current market price
for such raw material is approximately RMB 1,100,000 per ton. The term of the
Development Agreement is ten years, terminating on January 9, 2020. We began selling
raw material in the form of branches and leaves of yew trees to Yew Pharmaceutical
commencing in February 2010.
Yew Pharmaceutical is owned 95% by Heilongjiang Hongdoushan Ecology Forest Co.,
Ltd, a Chinese company, or HEFS, which itself is owned 63% by our founder, President
and one of our directors, Zhiguo Wang, and 34% by his wife, Guifang Qi, who is
also one of our directors. The remaining 5% is owned directly by Madame Qi. See
Item 13, “Certain Relationships and Related Transactions, and Director Independence”.
Yew Pharmaceutical is the exclusive manufacturer of Zi Shan in the PRC. Zi Shan
is sold in sachets in HFDA-approved dosages of two grams per sachet. It is consumed
as a tea twice a day for therapeutic purposes or once a day for general health
benefits. Approximately 30% of Zi Shan sales to date are in Heilongjiang Province
and approximately 70% of such sales are from other provinces.
Starting in June 2010, other pharmaceutical companies started purchasing yew raw
materials from us to manufacture and sell TCM similar to Zi Shan in other provinces.
Yew Trees
We have developed a detailed process of yew tree breeding. We start growing yew
trees from seedlings that we purchase from various third parties, including certain
affiliates. These seedlings come from naturally-grown mature yew trees. Because
yew trees are protected, yew seedlings are scarce. Prices have been rising for
yew seedlings by approximately 20% per year in recent years and we expect that
to continue for at least the next few years. Our largest supplier of yew seedlings
is a company that is directly and indirectly owned primarily by Mr. Wang and Madame
Qi. See “Suppliers” below and Item 13, “Certain Relationships
and Related Transactions, and Director Independence”.
We cultivate the yew seedlings at our nurseries for at least three to four years.
Most of the land we lease from various parties for the growth of yew trees is
location in and around Harbin. We have entered into several land use agreements
with various parties, which provide the potential for us to grow a large number
of yew trees on large areas of land over the next few decades, although we cannot
currently estimate the number of trees we will grow or the total amount of land
we will put into production over such period. Among these land use agreements,
pursuant to the Joint Venture Agreement, we have been granted permission to grow
yew trees on up to 1,000,000 mu (approximately 166,667 acres) and to share profits
80% to the Company and 20% to the Wuchang Forestry Bureau. In addition, we have
been provided two areas to use as nurseries for the cultivation of yew seedlings
in the aggregate amount of 1,400 mu (approximately 233 acres). See Item 2, “Properties”.
When the yew trees are mature enough for transplanting, we prepare survey and
design specifications for an afforestation plan. Once this has been prepared and
approved, we clean and divide the reproducing area, clearing brushwood and weeds,
and mark off breeding areas of between five and eight meters in width and less
than one meter in length. We typically plant stock in the spring, when the defrosted
soil is a depth of at least 15 centimeters.
The cut materials are then dried for a period of 18-20 hours at a temperature
of between 55°C and 60°C, with the temperature monitored every three hours.
After the drying process, the moisture content of the plant material should not
exceed 8.0%. We then use a crusher to grind the plant material into a powder.
The powder is mixed before being put into sealed plastic bags. The sealed plastic
bags are put into outer shipping material and the package undergoes a final inspection
before being ready for shipment.
By using our patented Asexual Reproduction Method, developed by our founder and
President, Zhiguo Wang, we are able to accelerate the commercial viability of
a yew tree, so that it is able to be used for commercialization starting in approximately
three years, compared to more than 50 years for naturally grown yew trees. For
example, the branches and leaves from an accelerated growth yew tree can be used
in the production of TCM in three to five years, and a cutting from an accelerated
growth yew tree will develop into a small yew tree that can be sold as a potted
tree starting in approximately three years. We are authorized sell cuttings of
cloned yew trees without a government permit.
We sell yew trees primarily to state-owned enterprises and private businesses
for reforestation in Heilongjiang Province and Jilin Province, in Northeast China.
Historically, we have sold the majority of our yew trees to a small number of
larger customers. However, even though we have a number of long-term customers,
we do not enter into long-term agreements for the sale of our yew trees. Because
our profit margin is smaller for larger customers due to volume price discounts,
we are making efforts to increase sales to smaller customers. Our business relating
to the sale of yew trees is seasonal. March to May, November and December are
our strongest months.
After a period of three-to-seven years under cultivation, we also transplant some
yew trees into decorative ceramic pots and sell these to retail customers for
display in homes and offices. The Chinese people believe that in addition to its
aesthetic qualities, yew trees help cleanse the air and reduce pollution. Accordingly,
yew trees are purchased by individuals for personal use in their home or office
and are often given as gifts. Yew trees can be found at landmarks around the world,
including the White House and Lincoln Memorial.
We purchase high quality ceramic pots from third parties into which the yew trees
are transplanted. We believe that there is a readily available supply of high-quality
ceramic pots at relatively low and stable prices.
Because of the limited supply of yew trees and restrictions on the commercial
use of yew trees, combined with the high quality of the ceramic pots we purchase
from third-party sources, primarily in South China, used for the transplanted
trees, the potted yew trees that we sell are highly prized and we charge premium
retail prices by Chinese standards. Retail prices of potted yew trees vary based
on the age, shape and other desirable qualities of the tree, and range from approximately
RMB 280 to approximately RMB 3,080.
In connection with our entering into a land use agreement in July 2012, or the
Fuye Field Agreement, we acquired more than 80,000 trees - which are not yew trees
- located on that property. These trees consist of approximately 20,000 larix,
56,700 spruce and 3,700 poplar trees. Larix trees are used primarily in landscaping
and we currently anticipate that we will begin selling larix trees to customers
during 2013. Spruce and poplar trees are used primarily as building materials
and we currently anticipate that we will begin selling these trees to customers
in later periods, when these trees reach maturity in several years.
Handicrafts
Yew wood is of medium strength, making it possible to fashion products from the
yew tree without undue effort or expense requiring special equipment. To create
our current inventory of award-winning handicrafts, including furniture, historically
we employed between 15 and 20 artisans from throughout the PRC, principally from
Fujian Province and Jiangxi Province in southern China, annually from summer through
late fall, to manufacture handicrafts made from yew timber at our production facility
near Harbin. Since we currently have an adequate inventory of handicrafts, we
now manufacture additional handicrafts only when orders are placed.
We begin the process of manufacturing handicrafts by selecting yew timber with
greater variation in molding, which is indicative of a more attractive grain to
the wood. The selected timber is then placed in a drying chamber and steam is
injected to accelerate water evaporation until moisture content is only 3%. Depending
upon the size and thickness of the timber, this process can take as long as one
week.
The process of designing the item to be created begins with rough basing, based
on geometrical form to summarize the overall artistic idea. During the entire
process of carving the timber it is important to minimize knife scarring. Our
crafted pieces typically go through a dying process; this not only can address
certain small imperfections in the wood but is also done to aesthetically enhance
the finished piece. After waiting at least twelve hours following dyeing, the
carved item is then polished with sandpapers of different roughness and finally
finishing cloths.
All of our products are hand-made, using yew tree timber of different maturities.
Much of the furniture that we produce is reproductions of popular Ming and Qing
Dynasty styles. We have acquired an inventory of yew timber from various parties
over a number of years and have an adequate supply on hand for approximately five
more years’ worth of production. Because of the scarcity of yew timber needed
to produce handicrafts, it is very expensive to acquire new inventory of yew timber
and supplies are extremely limited, if available at all. Accordingly, we plan
to reduce and eventually eliminate our handicraft segment over the next several
years.
Pursuant to the Department of Forestry of Heilongjiang Province (2003) Document
No.188, issued by Department of Forestry of Heilongjiang Province on October 25,
2003, we have been granted rights to develop comprehensively and use Northeast
yew resources. We believe that we are one of only a few companies in the PRC to
have received approval for the manufacture of items made from yew timber.
Because of the limited supply of yew timber and restrictions on the commercial
use of yew trees, combined with the high quality of artisans we employ, the handicrafts
and furniture we manufacture are highly prized and we charge premium retail prices
to our customers. Examples of retail prices for some of our products are as follows:
a pair of yew chopsticks sells for approximately RMB198;
a fountain pen sells for approximately RMB2,480;
sculptures can sell for tens of thousands of RMB; and
large pieces of furniture can sell for more than RMB100,000.
Wood Ear Mushroom
Wood ear mushroom grows in the deep forests throughout Asia, Europe and the United
States. Though highly valued for its nutritional benefits in Asian regions, this
crunchy, dark brown colored, and ear shape little super food is rarely sought
after by its western counterparts. Wood ear mushroom contains high levels of polysaccharides,
dietary fiber, protein, vitamins, and 20 times more iron than spinach, making
it the new undisputed king vegetable. In addition, with rising concerns of heart
health related diseases, researches have shown that antioxidants and anti-inflammatory
agents contained in wood ear mushroom can be an excellent alternative to traditional
supplements.
|