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Jul 11, 2019

CannTrust's Danish partner quarantines more pot connected to unlicensed rooms

CannTrust

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TORONTO -- CannTrust Holdings Inc.'s (TRST.TO) Danish partner has quarantined more medical pot products linked to illegal cultivation at the Canadian cannabis company's greenhouse and warned of possible shortages in Denmark as a result.

Stenocare said Thursday that, contrary to the initial information it got from the licensed producer, it has now received documentation that shows that five batches of the Danish company's inventory originated in growing rooms that did not have government approval.

"As a result of the new information, all products delivered from Stenocare relating to the batches in question will be put in quarantine, which means that they will be isolated and blocked from being sold until the Canadian health authorities, Health Canada and the Danish Medicines Agency have concluded in the matter," the company said in a statement.

Stenocare, which caters to medical cannabis patients, added that "most, yet not all" of the CannTrust products in its inventory and that it has supplied to the Danish market since June 10 are linked to the unlicensed cannabis cultivation.

It was a reversal of Stenocare's comments earlier this week when it said only one "very small" batch was connected to the unlicensed growing, which Health Canada continues to investigate.

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    CannTrust announced a joint venture with Stenocare that saw it receive a 25 per cent equity stake in the Danish company in March 2018 and made its first shipment of cannabis oil to Denmark in September 2018.

    The Canadian cannabis company said Monday it had been notified by Health Canada that the regulator had discovered unlicensed cultivation at its Ontario greenhouse between October 2018 and March 2019, before the five rooms received the appropriate licences in April 2019.

    It said as a result, Health Canada put on hold roughly 5,200 kilograms of CannTrust products from that facility, and the licensed producer put a voluntary hold on an additional 7,500 kilograms of pot products which were also linked. CannTrust's chief executive Peter Aceto has said this represents the "majority" of its inventory and warned of potential shortages ahead, but noted the company continues to grow and sell cannabis products.

    CannTrust was not immediately available to comment on Thursday. Peter Aceto said on Monday that "mistakes" were made but CannTrust is working to get back into compliance with Health Canada and is conducting a thorough review to determine what transpired.

    Stenocare said it was in close dialogue with the Danish Medicines Agency, which regulates medicinal products in the country, about the matter.

    "The most likely consequences from this new situation is that there will be a temporary shortage of medical cannabis products to the Danish market," the company said in a statement. "This will have negative financial consequences to Stenocare irrespective of the fact that CannTrust is contractually committed to deliver fully licensed and approved products."

    CannTrust's shares closed down 1.94 per cent to $4.04 on the Toronto Stock Exchange on Thursday. That's sharply down from its closing share price of $6.46 the previous Friday, before CannTrust disclosed Health Canada's findings on Monday.

    Stenocare's wider quarantine comes one day after authorities in Alberta and Ontario pulled or put on hold CannTrust's products until Health Canada completes its investigation.

    The Alberta Gaming, Liquor and Cannabis Authority on Wednesday said it was placing the affected lots of CannTrust's products on hold as a precautionary measure. The decision impacts online product available through AlbertaCannabis.org and AGLC distribution.

    "It is at the discretion of privately licensed Alberta retailers to work in consultation with CannTrust and Health Canada to determine whether they will continue to sell existing inventory, should they have affected products," said Heather Holmen, an AGLC spokeswoman, in an emailed statement.

    Earlier Wednesday, the Ontario Cannabis Store said it had removed certain CannTrust Products from its online store and distribution to physical outlets.

    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.