Canntrust plunges after latest breach disclosed
Canntrust’s stock took another major hit Monday after the embattled cannabis producer disclosed it had received a second non-compliance rating from Health Canada, this time in connection to its facility in Vaughan, Ont.
The violations at the 60,000-square-foot manufacturing facility included converting five rooms into storage areas that were used to hold cannabis beginning in June 2018 and the construction of two new areas, one of which was used to store cannabis from November 2018 onward, all without approval from Health Canada.
The company’s shares plunged more than 27 per cent to close at $3.04 in Toronto, erasing much of a surprise gain they had posted on Friday.
They remain well below the $6.46 mark at which they were trading six weeks ago, when the company first acknowledged it was being investigated for growing cannabis in unlicensed rooms in its Pelham, Ont., facility.
Health Canada conducted an inspection of the Vaughan facility, north of Toronto, between July 10 to July 16, which led to the most recent non-compliance order. Since legalization, Health Canada had only conducted one other in-person inspection of that facility, on April 16, 2019, according to department spokesperson Tammy Jarbeau.
Canntrust’s Vaughan facility used to be an indoor cultivation site, but in late 2018 the company shifted all its cultivation operations to Pelham and designated Vaughan as its manufacturing site, where harvested cannabis would be stored, ready for shipment.
Canntrust’s extraction capabilities — which it was planning to employ in the lead-up to the legalization of edibles and concentrates — also reside at the Vaughan site.
“A big takeaway from today’s announcement is that the company is now without its manufacturing facility, which will limit its nearterm ability to resume sales,” said Jesse Pytlak, an analyst at Cormark Securities.
“Now that you have that facility offline, it creates a bottleneck in the business.”
A company statement Monday said Health Canada’s inspection also found “insufficient security controls, inadequate quality assurance investigations and controls” and “documents or information that were not retained in a manner to enable Health Canada to complete its audit in a timely manner.”