CannTrust halts sales amid Health Canada probe, sending stock down lower

CannTrust Holdings Inc.’s move to voluntarily halt all sales and shipments of its cannabis products amid Heath Canada’s investigation into illegal cultivation at one of the company’s facilities has further fuelled its stock’s steep descent.

Shares of the Vaughan, Ont.-based licensed producer were down more than 12 per cent to $3.55 on the Toronto Stock Exchange in midday trading on Friday, down sharply from its closing price of $6.46 one week ago before CannTrust disclosed Health Canada’s findings involving its Ontario greenhouse.

CannTrust late Thursday announced it had implemented a voluntary hold on the sale and shipment of all cannabis products “as a precaution” while Health Canada visits and reviews its Vaughan, Ont.-based manufacturing facility.

“CannTrust is working closely with the regulator through the review process and expects to provide further detail of the duration of the hold and other developments as they become available,” the company said in a statement.

It added that it placed a hold on medical sales through its customer service line and online as of 11:59 p.m. on Wednesday.

The Canadian cannabis company said Monday it had been notified by Health Canada that the regulator had discovered unlicensed cultivation at its Ontario greenhouse between October 2018 and March 2019, before the five rooms received the appropriate licences in April 2019.

It added that Health Canada put 5,200 kilograms of cannabis on hold and CannTrust voluntarily put another 7,200 kilograms of product on hold, but would continue with cultivation and sales.

Meanwhile, former CannTrust employee Nick Lalonde said he was asked to put up fake walls and obscure unlicensed plants in photos that were submitted to Health Canada

The allegations, first reported by the Globe and Mail, were repeated to The Canadian Press by Lalonde on Thursday.

“We were hanging them up to cover up all these plants, thousands of plants… and then we would be taking these photographs,” said Lalonde, who previously worked in CannTrust’s Niagara-area greenhouse.

He added that supervisor indicated that the photos were destined for Health Canada and the walls concealed the cultivation in unlicensed rooms.

“This is a government entity… I’m not okay with this,” Lalonde said he replied at the time, adding that he had notified regulators of his concerns once he left the company in May.

CannTrust chief executive Peter Aceto has said “mistakes” were made and it is conducting a thorough review with the help of external advisers to determine what transpired.

On Thursday, it also announced that an independent special committee of CannTrust’s board of directors has been established to “investigate this matter in its entirety.”

Earlier Thursday, CannTrust’s Danish partner said it had upped the amount of CannTrust’s products it has put in quarantine, pending Health Canada’s investigation.

Stenocare said in a statement that it had received updated information from CannTrust that showed five batches of the Danish company’s inventory originated in the five unlicensed rooms and these products have been quarantined for potential destruction. Earlier this week, Stenocare said only one “very small” batch of products had been affected.

On Friday, the Nova Scotia Liquor Corporation told The Canadian Press that it had placed all CannTrust product in its distribution centre on hold.

Authorities in Ontario and Alberta had also removed from sale and distribution or put on hold certain affected products from CannTrust.

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