The fundamental credit outlook for the US pharma biz continues to be negative, thanks to patent expirations, a slow rate of drug approvals and the possibility of healthcare legislation that would vex brand-name drugmakers, according to the latest report from the credit-rating service.

“The US pharmaceutical industry’s profitability and cash flow remain strong and litigation exposure has declined, but the industry, long one of the stalwarts among the non-financial corporate sector, has entered a period of unprecedented uncertainty,” Moody’s senior vp Michael Levesque says in a statement.

While drugmakers headquartered in the US have highly liquid balance sheets, he continues, most of their cash has accumulated offshore, and may only be available with adverse tax consequences. At the same time, a large number of patents expire between 2010 and 2012, and beyond as well, but pipelines are ulikely to offset the trend. Here is the report.

Meanwhile, the FDA is taking a slower and more cautious approach to new drug approvals. During 2007, for example, the FDA approved 16 new drug applications involving new chemical entities,
compared with 36 in 2004, Moody’s notes.

Who benefits? Probably generic drugmakers. But big brand-name drugmakers are likely to buyback more stock, make bigger acquisitions or some other fundamental changes to their business model, which could lower credit ratings.