A day after revelations that Health Canada had seized unlicensed cannabis CannTrust Holdings Inc. was growing in Ontario, a Danish company said it sold some of that illegal pot to its patients, increasing the likelihood of further penalties.

A Denmark-based medical cannabis company said Tuesday that it had received a number of batches of pot from CannTrust and after investigating, found that one was from part of the unlicensed CannTrust grow. Stenocare A/S said in a statement that the illegally exported batch was small, the company has placed it into quarantine and it would not affect patients’ access.

The Canadian Cannabis Act forbids the export of unlicensed cannabis and says anyone who does so is guilty of an indictable offense and liable to imprisonment or fines. Health Canada did not immediately respond to a request for comment. U.S.-listed shares of CannTrust CTST, -6.01% TRST, -5.40%  closed down 6% Tuesday after falling nearly 25% in Monday’s trading session.

In an emailed statement, a CannTrust spokeswoman said, “CannTrust has confirmed that all but one product lot received by Stenocare have been cultivated in fully licensed rooms. Stenocare informed the Danish Medicines Agency that the single, noncompliant lot has been placed on hold pending the outcome of the ongoing investigation by Health Canada.”

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On Monday, CannTrust said that Health Canada, the federal government agency responsible for licensing and inspecting facilities, seized more than five metric tons of cannabis that the agency said was harvested in unlicensed rooms. CannTrust further voluntarily held more than seven metric tons of pot.

To put the holds in context, according to its May financial results, CannTrust said it had produced nearly 10 metric tons of pot and sold roughly three metric tons during the prior three-month quarter.

Both Bonify [Medical Cannabis] and CannTrust came to the attention of Health Canada because of whistle blowing,” TrueTrace Technologies Inc. Chief Executive Robert Galarza said in a telephone interview. TrueTrace makes software that registers and tracks intellectual property for cannabis companies.

“What happens in an organization without that level of disgruntlement or unease? We have a lot of work to do to create consistent visibility on this inventory.”

Medical patients will experience temporary product shortages, as a result of the hold, CannTrust said, while it figures out what to do about not having enough pot. It’s not clear what the financial impact will be until Health Canada completes its testing.

See also: Cannabis stocks dragged down by CannTrust’s losses after cannabis seizure

According to several investors, the Ontario Cannabis Store has removed three CannTrust products Tuesday, all of which are cannabis flower. The site still lists CannTrust pre-rolled joints for sale. CannTrust’s website also lists several products that are temporarily unavailable.

The Ontario Cannabis Store told MarketWatch in a statement that it had put a temporary hold on “certain” CannTrust cannabis products and removed “all effective products from distribution pending the outcome of the investigation.”

CannTrust Chief Executive Peter Aceto said the company had made errors in judgment, “but the lessons we have learned here will serve us well moving forward.” The company is planning to step up employee training, to retain external advisers to review its compliance processes and other procedures, he said.

Additional reporting by Ciara Linnane.

 

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