CannTrust to destroy pot plants, inventory worth $77 million
Ontario producer hopes to regain licence it lost for illegally growing cannabis
Cannabis producer CannTrust Holdings Inc said on Monday it would destroy about $12 million worth of plants and about $65 million worth of inventory, as the company’s new management seeks to regain full regulatory compliance.
Health Canada had frozen more than half of CannTrust’s stock of marijuana and the company had earlier estimated its inventory and assets impacted by regulatory issues to be about $51 million.
The Canadian health regulator cancelled CannTrust’s licence to produce and sell cannabis in September, months after it found the company was illegally cultivating pot.
Since the company was found to be growing illegal pot back in July, it has fired its chief executive officer, disclosed a regulatory investigation, and said its results may have to be restated.
The company said on Monday it would not challenge the regulator’s suspension order.
The Vaughan, Ont.-based company said its plan to regain regulatory compliance includes measures to recover cannabis that was not authorized by CannTrust’s licence and improve its inventory tracking.
CannTrust will provide a detailed plan to Health Canada on or before Oct. 21.
“This plan will aim to address all of the measures identified by Health Canada as necessary for the reinstatement of the Company’s licenses,” the company said.
The material to be destroyed includes product that was returned by patients, distributors and retailers. “Given the status of its licenses, the company is unable to process the material being destroyed or sell it to other licensed producers,” it said in a statement.
CannTrust said the destruction process will allow it to free up much-needed capacity to both implement remediation measures and store material that has been grown and processed in accordance with its licence since April 5, 2019.
“CannTrust is confident that its detailed remediation plan will not only address all of the compliance issues identified by Health Canada, but it will also build a best-in-class compliance environment for the future,” Robert Marcovitch, the company’s interim chief executive officer, said in a statement. “We have already made significant progress in these efforts. Our goal is to meet and exceed Health Canada’s regulatory standard, and to rebuild the trust and confidence of our primary regulator, investors, patients, and customers.”
The company’s U.S.-listed shares, halted before the news, rose 24 per cent after the announcement. The stock ended the day at US$1.04, up 13.3 per cent, but is down more than 75 per cent year-to-date.
The company has one “buy” rating, one “hold” rating, and one “sell” rating from analysts, and a consensus price target of US$1.51, according to Bloomberg data.