Among diagnostic specialties, anatomic pathology is the last holdout against the digital revolution. Pathologists still detect disease by looking at tissue samples on a glass slide through a microscope, just as they have done for a hundred years. But in the last couple of years, start-up companies have begun to break the bondage of pathologists to slides. Their solution: platforms for digitizing slides so they can be accessed through computer networks by clinicians anywhere in the world. Two start-ups, Aperio and BioImagene, have led the way and now all the big imaging manufacturers, the microscope companies and biomarker developers want in.

Looking back on 2007 through the lens of acquisition activity reveals a lot about the current dynamics in the medtech industry. According to Windhover's Strategic Transactions Database, many of the 80 medical devices companies that were acquired last year came from the perennially hot orthopedics and cardiovascular markets. But in 2007, buyers found their targets in clinical areas that are starting to heat up: patient monitoring, in vitro diagnostics, minimally invasive surgery, and women's health. The acquirers themselves were a mixed bag--for a change, traditional buyers didn't make up the largest share. In fact, those billion dollar plus companies were as likely to divest as to acquire in 2007.

Looking back at 2007, the performance of the medical industry seems strong, from blockbuster M&A to a better-than-expected result of a years-long DOJ investigation into the orthopedics industry. Even Boston Scientific seemed finally to be turning the corner. Drug-eluting stents (DES) got a second chance as data presented from several trials showed better mortality than with bare-metal stents. Venture capitalists poured even more money into device start-ups, both young and old. The confidence shown by venture investors was, not surprisingly, reflected in an IPO market that appeared to continue its recent rebound. But there are also some concerns: company consolidation, increased safety concerns and litigation revolving around physician-manufacturer relationships are causing some to wonder how long the foundation on which the industry's strong showing of recent years can sustain.