Alberta to return CannTrust products after Health Canada suspensions

The Alberta government’s cannabis wholesaler and online retailer is returning products from CannTrust Holdings Inc. after Health Canada suspended the company’s licences to produce and sell pot.

“AGLC will be returning its remaining supply of on-hold CannTrust products to the licensed producer,” said the Alberta Gaming, Liquor & Cannabis Commission’s spokeswoman Angelle Sasseville in an emailed statement Wednesday.

The AGLC would not confirm the amount or value of the on-hold product to be returned to the Vaughan, Ont.-based company, citing contract confidentiality.

The move comes one day after CannTrust disclosed that it received a notice from Health Canada indicating its authority to produce and sell cannabis had been suspended.

The Nova Scotia Liquor Corp. also said Wednesday it is no longer selling CannTrust products and it plans to return the product it is holding at its distribution centre.

“This is a decision that had been made prior to the latest Health Canada action,” spokeswoman Beverley Ware wrote in an emailed statement.

CannTrust has been mired in turmoil since it first disclosed in July that Health Canada had discovered illicit cultivation in several rooms at its Pelham, Ont. greenhouse.

The company later voluntarily halted all sales and shipments of cannabis, terminated its chief executive “with cause” and asked its chairman to resign after the board discovered new information during an internal investigation into the incident.

CannTrust has also since hired a financial adviser to help explore a potential sale and other strategic alternatives for the company and last month disclosed that the Ontario Securities Commission had opened an investigation.

The AGLC had placed a hold on its inventory of CannTrust products in July as a precautionary measure as the federal regulator conducted its probe, but on Wednesday decided to return those goods.

CannTrust did not immediately respond to a request for comment on Wednesday on the product returns, but had earlier provided a statement on its suspension.

“CannTrust’s paramount and urgent priority is to satisfy regulators that the company meets or exceeds all regulatory requirements so that the reasons for suspension no longer exist, we are in a position to resume operations and to regain the trust and confidence of our shareholders, patients, customers and partners,” interim chief executive Robert Marcovitch said in an emailed statement.

Health Canada said late Tuesday that in addition to delivering the notices to CannTrust, inspectors were “seizing and detaining all cannabis products” at the company’s sites in Vaughan, Ont. and Pelham, Ont.

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

Ontario’s cannabis wholesaler and retailer, the Ontario Cannabis Store, said in August it was returning products valued at roughly $2.9 million to CannTrust because they were “non-conforming” under the terms of its master agreement with the company.

Other provinces say they are not taking any action in response to the suspension.

Cannabis NB said it is aware of Health Canada’s decision.

“It’s important to remember Health Canada has not issued a product recall,” Cannabis NB spokeswoman Marie-Andree Bolduc wrote in an emailed statement. “There are no safety issues with the products currently in the market. No action is required with the existing CannTrust products we have in stock at this time.”

The B.C. Liquor Distribution Branch’s position has not changed, spokeswoman Viviana Zanocco said.

“Until such time as Health Canada issues a recall or other direction, we will continue to supply CannTrust’s product to private and public retail stores,” she said in an emailed statement. “We remain in regular communication with Health Canada on this matter.”

Meanwhile, CannTrust’s share price continued to fall after slipping nearly 15 per cent on Tuesday to close at $1.70 on the Toronto Stock Exchange. The shares closed at $6.46 on July 5, before it disclosed Health Canada’s findings.

CannTrust’s stock was trading at $1.63 in early afternoon trading on Wednesday.

Douglas Miehm, an analyst with RBC Capital Markets, said as the company looks to get its suspension lifted, it will likely need “significant” improvements in governance, record keeping and inventory tracking while working to recover unlicensed cannabis sold into the market.

“With ongoing returns and operations at a standstill, the company could face meaningful cash burn over the coming months,” he said in a recent note to clients.

Media reports have suggested that CannTrust may have potential suitors, but, Miehm sees “few, if any, interested parties as most LPs in Canada generally have or are already building the infrastructure needed to support domestic demand and may not want to deal with the lawsuits facing the company.”

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