CannTrust's Danish partner quarantines pot products linked to illegal growing

11 July, 2019, 16:24 | Author: Regina Silva
  • CannTrust's cannabis sales put on hold by Health Canada for unlicensed growing

CannTrust has accepted Health Canada's non-compliance finding and has taken actions to ensure current and future compliance. It will be determined whether the cannabis meets the regulatory standards before it is allowed into the market.

The stock for the company declined over 20 percent in value after the opening bell both in NY and Toronto.

It goes without saying that the market did not react kindly to such an update and CannTrust stock fell by as much as 20% to $3.96 after hitting a new 52-week low of $3.86.

"The critical observations were for conducting unauthorized activities, namely producing cannabis in unlicensed rooms before obtaining approval from Health Canada, providing false and misleading information to inspectors during the course of the inspection, and inadequate record keeping", spokesman Geoffroy Legault-Thivierge wrote in an email.

"(The rooms) were constructed in a very compliant way with Health Canada.

"It's taken a huge negative on all of the Canadian-licensed producers". The facility has 12 rooms, all now licensed to produce cannabis. As a result, Health Canada has placed a hold on 5,200kg of dried cannabis produced from those five rooms until the regulator is satisfied the products are compliant with federal regulations.

The Danish company, which caters to medical cannabis patients, said it has worked with CannTrust to investigate the origins of all products it has received from the licensed producer and only one "very small" batch has been linked to the five unlicensed rooms.

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The marijuana producer confirmed that one person was sacked at its Niagara facility related to the unregulated growing.

CannTrust investors will have to wait in order to find out just how expensive these material losses will be for the firm's bottom line, as the company failed to provide an estimate on these costs.

The company did not disclose the financial impact from the non-compliance, while Miehm said he believes volumes from the held inventory represent the majority of CannTrust's products.

Health Canada says it made an unannounced inspection of the facility that resulted in an overall non-compliant rating. The department has demanded a formal response from CannTrust by July 17 to determine exactly how the unlicensed growing took place. We have made many changes to make this right with Health Canada. CEO Peter Aceto said that the company made a number of errors in judgement "but the lessons we have learned here will serve us well moving forward".

CannTrust faced its first downgrade following the news from Bank of America's (NYSE:BAC) division Merrill Lynch analyst Christopher Carey.

At the time of this writing, the company had an average analyst price target of US$7 in NY and C$12.50 in Toronto, according to TipRanks.

"The company is unlikely to have product available for sale from Pelham until Q4/19, forcing it to source from other LPs". New factors emerge from time to time, and it is not possible for CannTrust to predict all such factors.

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