David George-Cosh

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CannTrust Holdings Inc.'s (TRST.TO) recreational cannabis products have been pulled from the shelves of Canada's biggest pot market, the latest blow to the company after Health Canada said it was non-compliant with certain regulations. 

Daffyd Roderick, director of communications for the Ontario Cannabis Store, the province's online retailer and wholesale distributor to pot stores, confirmed that CannTrust's products weren't available for sale. 

"Due to the Health Canada temporary hold on certain CannTrust cannabis products, OCS has voluntarily removed all affected products from distribution pending the outcome of the investigation," Roderick said in an email to BNN Bloomberg. 

Roderick declined to specify what specific products were impacted or how much of CannTrust's cannabis was removed, but confirmed the OCS has stopped distributing the company’s products to authorized retail stores in the province. Screenshots distributed on social media that were unverified by BNN Bloomberg show three CannTrust products have been removed from the OCS website, but other products sold by the company are also currently unavailable for sale.

CannTrust's shares have plunged almost 27 per cent on the Toronto Stock Exchange since Monday when the company disclosed an inspection by Health Canada identified several unauthorized activities by the pot producer, such as producing thousands of kilograms of cannabis in unlicensed rooms before it had obtained the necessary approvals from the federal regulator. 

As a result, Health Canada ordered 5,200 kilograms of unlicensed cannabis to be placed on hold while CannTrust has voluntarily placed an additional 7,500 kilograms of dried cannabis equivalent produced in previously unlicensed rooms at its Vaughan, Ont. facility on hold as well.

A CannTrust spokesperson told BNN Bloomberg in an emailed statement that the company has been "communicating transparently with the provinces and is providing them with the information and support they need to make decisions regarding product available to consumers while Health Canada conducts their investigation." 

Other provinces such as British Columbia and Alberta are still selling CannTrust products despite Health Canada's investigation into the illegally-grown pot. 

Viviana Zanocco, manager of corporate communications for the B.C. Liquor Distribution Branch, which is the province's wholesale distributor of cannabis, said CannTrust has notified the organization of Health Canada's non-compliance finding. 

"Until such time as Health Canada issues a recall, or we receive further direction from the supplier, we will continue to supply CannTrust’s product to retail stores and to customers directly via our online B.C. Cannabis Store," Zanocco told BNN Bloomberg in an email. 

A spokesperson for Quebec's cannabis distributor said it is not selling CannTrust products because the company's cannabis has yet to be thoroughly vetted by the province's quality-control authority. Distributors in Atlantic Canada, Saskatchewan and Manitoba weren't immediately available for comment. 

While CannTrust stated on Monday it is unclear what the financial impact will be for the company in light of Health Canada's actions, one analyst expects the Vaughan, Ont.-based firm to source future product from third-party producers to continue meeting provincial purchase orders. 

"Given the well-reported supply shortages in the Canadian market, this could prove costly," said Russell Stanley, cannabis analyst at Beacon Securities, in a note to clients Tuesday. Stanley slashed his price target on CannTrust to $5.25 from $15.00 while downgrading his rating to "hold" from "buy." 

Cannabis Canada is BNN Bloomberg’s in-depth series exploring the stunning formation of the entirely new – and controversial – Canadian recreational marijuana industry. Read more from the special series here and subscribe to our Cannabis Canada newsletter to have the latest marijuana news delivered directly to your inbox every day.