Continuing the trend of consolidation in the drug business that has been occurring lately, specialty injectable pharmaceutical company Hospira (NYSE:HSP) has announced the acquisition of Australia-based Mayne Pharma.

Hospira primarily focuses on producing generic injectable products, although it has a robust portfolio of its own patented products as well. Mayne Pharma also operates primarily with generic injectable products. If the deal passes muster with Mayne shareholders, Hospira will acquire the company for $2 billion (more than 30% premium to Mayne's share price yesterday) in cash primarily financed through debt.

Mayne achieved $600 million in sales for fiscal year 2006, and the acquisition appears to be primarily about squeezing extra synergies, expected to be up to $50 million in savings in 2008, from the two companies' common areas of focus. Hospira will also gain access to Mayne's manufacturing plants and products in development, and will get to geographically expand its operations and sales force.

For a company of Hospira's size, adding on another $1.9 billion in debt to the nearly $700 million in long-term debt already on the company's books seems a little frightening, when looking at the $256 million in cash the company had in the bank before the $100 million spent on the acquisition.

Hospira does expect to achieve cash flow from operations for 2006 in a range of $425 million to $475 million. It will be important to make sure that this number does not materially decrease in order to ensure that the company can continue to pay down its debt. It should be noted, though, that the $180 million in cash flow that has occurred in the first half of this year is already significantly less than the $300 million the company earned in the same time period last year.

With estimated earnings per share before the acquisition of about $2 for the year, shares of Hospira are not expensive at today's price; but with sales only expected to grow 7% to 9% for the year, the company is not exactly in a high growth stage at this point in time.

Considering this stagnating growth, Hospira's management will need to wring some serious economies of scale and synergies from this acquisition in order to make taking on all that additional debt worthwhile.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy .