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CannTrust licence suspended by Health Canada

Health Canada has suspended CannTrust Holdings Inc.‘s licence to produce and sell cannabis, as of early morning Sept. 17.

The company received a Notice of Licence Suspension under section 64(1) of the Canadian Cannabis Act which involved a partial suspension for standard cultivation and full suspension of its licences for standard processing, medical sales, cannabis drugs and research issued under the cannabis regulations. While the suspension is in effect, CannTrust is not permitted to cultivate and harvest existing lots, including drying, trimming and milling. The company also cannot propagate new batches of cannabis or engage in its sale or distribution.

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 told The Canadian Press 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.

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.

The company announced in a statement that its management and board of directors are currently reviewing the Notice in consultation with its legal counsel and other advisors.

Over the past two months, CannTrust was under investigation after a Health Canada representative – during an unannounced inspection in June – discovered that the pot firm was growing cannabis in several rooms at its Pelham, Ont. facility before it got the appropriate licences to do so.

The pot company disclosed Health Canada’s findings on July 8, and nearly 13,000 kilograms of cannabis products linked to the five unlicensed rooms have been put on hold by both the regulator and voluntarily by CannTrust as samples undergo testing at government laboratories.

CannTrust voluntarily halted all shipments and sales of its products as Health Canada conducts its investigation and an independent special committee of its board of directors examines what transpired.

The company also cut ties with former CEO Peter Aceto and former chairman Eric Paul, claiming that the two executives kept the board in the dark from the illicit pot cultivation.

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 in September, the company also laid off about 180 employees or 20 per cent of its workforce, most of whom were in cultivation and customer service support roles. This took place just weeks before Ontario Cannabis Store pulled $2.9 million worth of CannTrust products from its shelves after it determined that some of the products were “non-conforming” under the terms of its master cannabis supply agreement.

(Updated with files from The Canadian Press)