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It is not, however, the first sell-off the company has experienced. After a less-than-stellar earnings report at the end of March, CannTrust’s stock began a steady decline from a high of almost $13, dropping to the $6 range over the course of three months.

“The company is unlikely to have product available for sale from Pelham until Q4/19, forcing it to source from other LPs. Given the high costs in the B2b channel, we believe CannTrust’s margins could face significant pressure,” Miehm wrote.

In addition to the 5,200 kilograms of cannabis placed on hold by Health Canada, the company is voluntarily holding an additional 7,500 kilograms of dried cannabis equivalent for Health Canada inspection, and could face a potential recall of shipped products that were grown in unlicensed rooms.

In an emailed statement to the Post, Health Canada confirmed that it conducted a surprise inspection of CannTrust’s facility in Pelham on June 17 and subsequently returned to the facility on July 3 and 4 where inspectors “hand-delivered the report and seized 4,327 kilograms of implicated product and obtained samples for further testing.” The company has until July 18 to respond to Health Canada’s non-compliance inspection report.

“Based on our initial conversations with Health Canada, we believe that a revoked licensed and/or destroyed product while possible, are unlikely. The agency has historically suspended licences when LPs were found to source/divert product from/to an unregulated channel. In our view, the CannTrust situation does not appear as dire as these scenario(s), and thus we believe the company should be able to maintain its LP status,” wrote Miehm.

In February, Health Canada suspended the licence of Winnipeg licensed producer Bonify after the company was found to be selling product it had obtained from the illicit market and failed to comply with good production practices.

• Email: vsubramaniam@nationalpost.com | Twitter: VanmalaS