Published: Tue, July 09, 2019
Markets | By Otis Pena

Pelham cannabis grower knocked by Health Canada

Pelham cannabis grower knocked by Health Canada

CannTrust Holdings (NYSE:CTST) is down 15% premarket on modest volume in response to a recent audit of its Pelham, Ontario greenhouse facility by Health Canada showing non-compliance with certain regulations.

The company violated federal regulations by allowing production to occur in five grow rooms in its 12-room facility between October 2018 and March 2019, CannTrust said in a statement, adding that licenses have been subsequently issued for those rooms. The rooms received licences in April.

According to the producer, Health Canada placed an immediate hold on 5,200 kilograms worth of dried cannabis product.

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.

CannTrust Holdings Inc. shares plunged more than 20 per cent Monday after it was revealed that Health Canada discovered illegal growing operations at a greenhouse and seized thousands of kilograms of the pot producer's inventory.

CannTrust CEO Aceto should be embarrassed by the company's missteps, issue an apology and follow up with his resignation, Brochstein said.

It's also conducting its own review.

Its stock fell 22.14 per cent on the news.

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

Any forward-looking information and statements speak only as of the date on which they are made, and, except as required by law, CannTrust does not undertake any obligation to update or revise any forward-looking information or statements, whether as a result of new information, future events or otherwise.

CannTrust said it has implemented some corrective actions, such as the retention of external advisers for an independent review of its compliance process and it has voluntarily advised Health Canada of "issues that may impact compliance at its Vaughan facility regarding product storage".

CannTrust warned that as a result of the inventory on hold, some customers and patients will face product shortages.

In the long-term, there will be an impact on CannTrust's credibility, Tomkins added.

"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.

"The fact the company never spotted this, or indeed still doesn't know how it happened, is a concern", he said.

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