CannTrust stock drops 30% after second facility breaches marijuana regulations

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Besieged Canadian cannabis grower CannTrust was notified that a facility was recently deemed noncompliant with a host of federal cannabis regulations – the second significant breach at its facilities in just over a month.

The company said it accepted Health Canada’s findings, which were delivered after markets closed Friday.

Heath Canada’s July 10-16 inspection of the Vaughan, Ontario, facility found:
  • Five rooms were converted to storage areas without prior regulator approval.
  • Two new areas were constructed without approval of Health Canada, one of which was used to store cannabis since November.
  • The manufacturing facility had insufficient security and quality-assurance controls.
  • Standard operating procedures did not meet minimum requirements.
  • Documents or information were not retained to enable the regulator to complete its audit in a timely manner.

CannTrust’s stock has been in a tailspin on the Toronto and New York stock exchanges since a whistleblower alerted Health Canada to unlicensed cultivation at its greenhouse in Pelham, Ontario, over a month ago. The company’s shares fell more than 30% in the wake of those revelations.

CannTrust’s shares have fallen another 30% this week after the company disclosed the latest breach.

The federal regulator is still determining the appropriate compliance and enforcement action for the Pelham, Ontario, regulatory violations.

Health Canada advised the company it could not provide any guidance about the timing of that decision, CannTrust said in a news release.

In the past month, the company halted all adult-use and medical sales, fired its senior leadership, and faces a probe by securities regulators and police.

CannTrust also hired a financial adviser to review “strategic alternatives,” including a possible sale of the company.