Albany Molecular Research (NASDAQ:AMRI) turned in its first-quarter results and, as expected, revenue and earnings continued to slide. Still, the provider of medicinal chemistry and chemical development services may have bottomed out, and over the long haul there are still reasons to keep Albany Molecular on the radar.

Revenue for the quarter declined 10.8% year over year to $43.4 million, as royalty revenue from the firm's rights to Allegra, the allergy drug marketed by Sanofi-Aventis (NYSE:SNY), dropped 40% to $7.2 million as a result of generic competition. However, royalty revenue was actually up 15% from last quarter. These revenues could dip more in the coming quarters, but it's worth pointing out that Albany Molecular will continue to receive at least some royalties from the drug.

Also on the positive side, at $36.2 million, Albany Molecular's contract revenue came in 13% higher than the company's fourth-quarter forecast, and down just 1% year over year, despite the loss of a major contract with General Electric's (NYSE:GE) GE Health care. Earnings were down considerably at $0.06, compared to $0.18 in the first quarter of 2005. Again, though, EPS was not as bad as expected, since the result beat the consensus estimate of $0.02.

Despite all the negatives facing the company, Albany Molecular did execute its strategy of stabilizing and building its contract services business. This provides a little more confidence that the firm will meet its projections of a 10% to 17% increase in contract revenue for 2006.

Further, Albany Molecular's agreement to test compounds for Bristol-Myers Squibb (NYSE:BMY) provides the possibility for the firm to recapture a royalty stream sometime in the future. Admittedly, this is a very big "if," and Albany Molecular would be more intriguing were it to ink more such deals with other major pharma companies. Still, with shares hovering close to all-time lows, the company may be worth monitoring.

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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.