Uruguay has struggled to build a medical marijuana export industry since it legalized the plant almost a decade ago. Now the backers of a multi-million dollar cannabis extraction lab see an opportunity to turn the South American country into a global supplier of pharmaceutical ingredients.

“Uruguay has a very stable regulatory framework and a history as a pharmaceutical hub for the region,” GreenMed chief executive officer and co-founder Ignacio Bussy said in an interview. “That makes Uruguay a potential player in the pharma grade cannabis industry.”

A European family office and four Uruguayan and Argentine investors founded GreenMed last year to make pharmaceutical ingredients and other medical cannabis products including dried flowers, extracts and distillates. The company’s 3,000 square meter (32,300 square feet) plant near the capital Montevideo is one of the largest in Uruguay, with the capacity to process 100 metric tons of dried flowers and 40 tons of extracts a year.

It’s a bet that the growing legalization of cannabis across the world will spur pharmaceutical companies to develop medicines from the plant. GreenMed is negotiating with several drug companies to supply active pharmaceutical ingredients, known as API, and co-develop medicinal products, he said.

“As regulations become clearer and certified API providers like ourselves come online, they are more willing to jump into the development of cannabis-based products,” Bussy said.

Bussy expects that pharmaceutical ingredients will generate most of the company’s annual sales that could reach $20 million by 2026.

Uruguay led the world in legalizing most uses of marijuana in 2013. However, bold predictions the country would already be exporting hundreds of millions of dollars by now never materialized due to red tape and the long learning curve that comes with any new industry.

Exporters shipped about 13 metric tons of cannabis worth almost $5 million during the first 10 months of the year, compared to 21.3 tons for $8.2 million in all of 2021, according to trade promotion agency Uruguay XXI. Exports of medicinal products and extracts totaled just over $19,000 from January through October.

Bussy says Uruguay’s cannabis industry should focus on high-value products like pharmaceutical ingredients instead of trying to compete with low-cost countries in the farming side of the business.

GreenMed currently sources flowers rich in THC, CBD and starting next year CBG from a network of growers in Uruguay. The company is in early talks to buy some flowers from a Colombian producer to diversify its raw material sources, Bussy said.

Bussy expects to start shipping extracts, isolates and consumer products like CBD oil to Brazil after they pass stability testing in the first half of 2023. GreenMed aims to export dried flowers and API to Europe later that year once it obtains E.U. good manufacturing practice certification. GreenMed is also testing a consumer CBD oil product that could hit local pharmacy shelves by the second quarter of 2023, he said.