CannTrust plunged into more trouble with Health Canada as second facility is adjudged non-compliant

It’s been a month to forget for CannTrust. In July, the firm announced an investigation into its non-compliance with Health Canada regulations.

It then admitted that the culprit in its non-compliance was its Pelham, Ontario facility, where “the growing of cannabis in five unlicensed rooms and inaccurate information provided to the regulator by CannTrust employees”. The firm subsequently fired CEO Peter Aceto.

Now, another chapter in the story:  after trading hours last Friday, August 9, 2019, CannTrust received a report from Health Canada notifying the company that another of its manufacturing facilities – this time in Vaughan, Ontario – had also been rated non-compliant with certain regulations.

CannTrust says that it has “accepted Health Canada’s findings and remedial actions are underway”.

Heath Canada’s rating was based on observations made during an inspection completed during the period July 10-16, 2019, which noted:

  • The conversion of five rooms from operational areas to storage areas, which were used for storage since June 2018 without prior approval of Health Canada;
  • The construction of two new areas without prior approval of Health Canada, one of which was used to store cannabis since November 2018;
  • Insufficient security controls at the manufacturing facility;
  • Inadequate quality assurance investigations and controls;
  • Standard operating procedures that did not to meet the requirements under regulations; and
  • Documents or information that were not retained in a manner to enable Health Canada to complete its audit in a timely manner.

This is a bad end to a torrid tale for CannTrust, which implemented a voluntary hold on the sale and shipment of all cannabis products while Health Canada reviewed its Vaughan, Ontario manufacturing facility.

CannTrust says it “continues to work closely with Health Canada and will provide further details of the hold and other developments as they become available”.

Under the direction of the recently constituted independent Special Committee of the board of directors of the Company and newly-appointed interim CEO, Robert Marcovitch, CannTrust says it has already begun the process of investigating and remediating the root causes of any non-compliance and expects to propose a robust remediation plan to Health Canada.

“We are looking at the root causes of these issues and will take whatever remedial steps are necessary to bring the Company into full regulatory compliance as quickly as possible.”

Robert Marcovitch, CannTrust (pictured)

Robert Marcovitch stated: “We are continuing to work hard to regain the trust of Health Canada, our patients, shareholders and partners. We have retained independent consultants who have already started addressing some of the deficiencies noted in Health Canada’s report. We are looking at the root causes of these issues and will take whatever remedial steps are necessary to bring the Company into full regulatory compliance as quickly as possible.”

Although CannTrust, under the supervision of the Special Committee, is preparing a remediation plan for submission to and consideration by Health Canada, Health Canada has advised the company that it is currently unable to provide any guidance about the timing or content of its decisions concerning the Company.

In other news, Canntrust has recently pre-paid the outstanding mortgage of approximately $13.3 million to Meridian Credit Union which was secured by its greenhouse in Pelham, Ontario, as well as associated interest and administrative costs. Meridian is arm’s-length to the Company and this loan represented the Company’s only secured indebtedness.Cannabis Business Worldwide