By Moira Warburton

TORONTO (Reuters) – Canada-based medical cannabis company CannTrust Holdings Inc said on Thursday it suspended sales of cannabis products after the federal health regulator found the company sold marijuana produced in unlicensed facilities.

Alberta is placing an unspecified amount of CannTrust products on hold as a precautionary measure, officials said, pending an investigation by Health Canada into whether cannabis from unlicensed facilities is safe for consumption.

The move by the Alberta Gaming and Liquor Commission (AGLC) comes after Ontario’s cannabis distributor pulled CannTrust products from its site.

The impact on financial results is not yet known, CannTrust said. The company has formed a special committee that includes independent members of the board of directors to investigate the matter.

CannTrust announced Health Canada’s findings of non-compliance in producing cannabis in unlicensed facilities on Monday, precipitating a 40% drop in stock value over the week. The company saw a decline of nearly 8% on Thursday.

The CannTrust case is the most high-profile occurrence of a company being rapped by Canada’s health regulator since the country legalized recreational marijuana in October, potentially raising questions about the ability of companies to achieve growth and stay within the legal regulations as production ramps up post-legalization, analysts say.

CannTrust’s Danish partner, StenoCare, announced on Wednesday it was quarantining one batch of product it had received, and then increased that number to five on Thursday.

“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,” Heather Holmen, spokeswoman for the AGLC, said in an email on Wednesday.

“As Health Canada has not issued a recall at this point, AGLC will continue to monitor the situation and respond accordingly once Health Canada releases their findings,” she said.

(Reporting by Moira Warburton and Sathvik N; Editing by Bill Trott and Lisa Shumaker)