Wednesday, 16 October, 2019


CannTrust faces Health Canada problems, warns of product shortages

CannTrust Holdings says Health Canada has ruled that the company's greenhouse facility in Pelham Ont. in not in compliance and placed an inventory hold on about 5,200 kilograms of dried cannabis CannTrust faces Health Canada problems, warns of product shortages
Conrad Doyle | 11 July, 2019, 16:28

In addition, CannTrust said it has instituted a voluntary hold of approximately 7,500kg of dried cannabis equivalent at its Vaughan manufacturing facility that was produced in the previously unlicensed rooms.

Health Canada is now doing quality checks on the company's products, a process that is expected to take up to two weeks.

In an interview with the Financial Post, CannTrust chief executive officer Peter Aceto would not provide specifics on what exactly happened at its Pelham facility between October 2018 and March 2019 that resulted in Health Canada's seizure of 5,200 kilograms of cannabis planted in five unlicensed rooms.

Health Canada says it made an unannounced inspection of the facility that resulted in an overall non-compliant rating. It will be determined whether the cannabis meets the regulatory standards before it is allowed into the market.

Canadian regulators slapped the firm with the warning after they found that growing of cannabis took place in five unlicensed rooms in the firm's Pelham, Ontario facility, dubbed the Niagara Perpetual Harvest Facility. Health Canada has placed a hold on approximately 5,200 kilograms of dried cannabis that was harvested in unlicensed rooms at the Pelham facility, until it deems CannTrust is compliant with regulations. These products passed quality control testing at Health Canada certified labs and the company's own quality control processes, CannTrust said.

At the moment, it's unclear whether there will be other legal actions taken against the company.

When asked if the product placed on hold would become a material loss for the company, a CannTrust representative declined to confirm and said further updates would be shared at a later time.

CannTrust Holdings Inc.'s Danish partner says it has quarantined a batch of products received from the licensed producer in connection with Health Canada's recent discovery of illegal growing operations at its Ontario greenhouse.

USA -listed CannTrust Holdings (NYSE: CTST) tumbled over 22 percent on Monday after the company admitted that Canadian regulators had seized its cannabis after discovering it was growing weed in unlicensed facilities.

"Based on our initial conversations with Health Canada, we believe that a revoked licensed and/or destroyed product while possible, are unlikely". The Company has also purchased 81 acres of land in British Columbia and expects to secure over 240 acres of land in total for low-priced outdoor cultivation which it will use for its extraction-based products. Results are expected in 10 to 12 business days. The company said it is exploring options to mitigate these shortages. "For us, this will make institutional investors think twice, and could also likely make it harder for CannTrust to attract high quality" partnerships with consumer-packaged goods companies.

Following this news, CannTrust stock fell sharply during intraday trading on July 8, 2019.

Note to readers: This is a corrected story.

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