We left last week on the breaking news that Hexo admitted "a limited quantity" of cannabis was grown in unlicensed areas (called "Block B") of its UP Cannabis Niagara production facility acquired when it absorbed Newstrike in May. (The facility was mothballed in October.)
Financial Post, Bloomberg
- According to the company, the growing took place on Newstrike's watch, and that company allowed growing in unlicensed rooms by mistake.
- Hexo said it only discovered the unlicensed growing when it acquired the site, and reported it immediately to Health Canada.
- The company said upon discovery, they immediately placed the unlicensed product on hold, and are now in the process of destroying.
Health Canada confirmed Hexo's version of the story, noting "Hexo proactively notified Health Canada and took actions to rectify the situation and return to compliance." The regulator judged the efforts "acceptable." This is a stark contrast to CannTrust's extensive efforts to cover up illegal growing.
MJ Biz Daily, Globe and Mail
Health Canada visited Block B in February 2019 as part of a facility inspection and did not notice unlicensed growing.
- Insiders said the increase in the number of LPs along with requests for site-amendments to prepare production facilities for 2.0 products left Health Canada inspectors "overwhelmed" and reliant upon LPs to supply information about their compliance "in good faith."
- After the CannTrust scandal this summer, an insider told me Health Canada was asking LPs to print out diagrams of their facilities showing licensed and unlicensed rooms. Following the Hexo revelations, that person told me, "HC will go through every single door with the facility blueprints now."
Canaccord Genuity cried foul that though the unlicensed growing was discovered and reported in July, it was not part of fiscal Q4 earnings report that included news Hexo was shutting down the location in question.
- A Hexo investor is applying to file a class-action suit against the company, saying it had promised its 20,000 kg supply agreement with Quebec guaranteed that sale. (Hexo said it allowed Quebec to buy only 10,000 kilos this year, in order to preserve the longevity of the arrangement). The investor also disputes Hexo predictions made after acquiring Newstrike Brands.
TVA Nouvelles—In French, Financial Post
Friday morning, less than 12 hours before releasing a press release acknowledging the unlicensed growing, Hexo discounted its products by as much as 30% in the Ontario Cannabis Store.
Twitter—What's My Pot