CannTrust Announces Senior Leadership Changes
logo (CNW Group/CannTrust Holdings Inc.)

CannTrust says certain licences suspended by Health Canada over ‘non-compliance’

CannTrust Holdings Inc.’s licenses to produce and sell cannabis were suspended Tuesday by Health Canada, the latest setback for the pot firm which has been under investigation by regulators for cultivation in unlicensed rooms.

The Vaughan, Ont.-based company said it received a notice of licence suspension from the federal regulator indicating its authority to produce cannabis, other than cultivating and harvesting, and to sell cannabis have been suspended.

It adds that the notice cites CannTrust’s “previous non-compliance with certain requirements of the Cannabis Act.”

CannTrust said it is facing a partial suspension of its licences for standard cultivation and a full suspension of its licences for standard processing, medical sales, cannabis drugs and research.

“While the suspension remains in effect, CannTrust will be permitted to cultivate and harvest existing lots or batches previously propagated, as well as conducting ancillary activities to those lots, including drying, trimming and milling,” the company said in a release. “During the suspension, CannTrust may not propagate new lots or batches of cannabis or engage in the sale or distribution of cannabis.”

Health Canada said in addition to delivering notices of suspension to CannTrust on Tuesday, inspectors were “seizing and detaining all cannabis products” at the Vaughan and Pelham sites.

“Under the terms of the suspension, CannTrust Inc. is permitted to take necessary actions to maintain the viability and quality of cannabis plants and cannabis products while Health Canada reviews any representations from the licence holder,” a department spokeswoman wrote in an email.

It said the company may respond to the notification within 10 business days to explain why the suspension is unfounded or information that Health Canada should take into consideration in its decision-making.

Health Canada will continue to closely monitor actions taken by CannTrust Inc. and will re-assess the status of the company’s licence as new information becomes available. Health Canada may also determine that additional compliance and enforcement actions are warranted.”

Back in July, CannTrust disclosed the federal regulator’s findings that the company was growing pot in several rooms at its greenhouse in Pelham, Ont., prior to receiving the appropriate licences from the government.

Health Canada has not issued a recall on CannTrust’s products but placed a hold on roughly 5,200 kilograms of dried cannabis and CannTrust put a voluntary hold on roughly 7,500 kilograms of cannabis products.

CannTrust later voluntarily halted all sales and shipments of cannabis as Health Canada continued its probe into the matter.

In late July, the company terminated its chief executive Peter Aceto “with cause” and asked its chairman Eric Paul to resign after the board discovered new information during an internal investigation into the alleged unlicensed pot growing. It also in July hired a financial adviser to help explore a potential sale and other strategic alternatives for the company.

Last month, CannTrust said its Vaughan, Ont.-based facility was also found to not be in compliance by regulators. Also in August, the company disclosed that the Ontario Securities Commission had opened an investigation into the issues around the alleged unlicensed growing at its Pelham greenhouse.

Earlier this month, CannTrust announced it was laying off about 180 people or roughly 20 per cent of the company’s workforce to “reflect the current requirements of our business.”

CannTrust’s shares have lost more than 70 per cent of their value since it first disclosed Health Canada‘s findings on July 8, and Tuesday’s announcement sent its shares down nearly 15 per cent.

After being halted for pending news on Tuesday, the stock slipped 14.57 per cent from its previous close of $1.99, to reach $1.70. That marks a nearly 74 per cent drop from its closing price on July 5 of $6.46.

CannTrust said on Tuesday that the company’s management and board of directors are reviewing the notice from regulators with its counsel and other advisers.

CannTrust added that the notice from Health Canada outlined several measures the company could take to address the “public health and safety risks” that contributed to its decision. These included measures to recover cannabis that was not authorized by CannTrust’s licence, to control the movement in and out of the company’s site, to improve key personnel’s knowledge of and compliance with regulations, and a plan to improve inventory tracking, the company said.

“Over the past two months, the company has moved swiftly to assess and address Health Canada’s concerns, including areas of operational non-compliance,” it said in the release. “The company remains committed to being in full regulatory compliance.”

Companies in this story (TSX:TRST)

Armina Ligaya, The Canadian Press