Healthcare brings stability for Bay Area firms

The Bay Area has long been synonymous with tech in the PR industry. But since the devastating tech crash in 2002, many firms have diversified to include healthcare - especially biotech. But with more economic uncertainty on the rise, healthcare is once again emerging as a major-business opportunity for agencies in the Bay Area looking for less volatility.

The Bay Area has long been synonymous with tech in the PR industry. But since the devastating tech crash in 2002, many firms have diversified to include healthcare - especially biotech. But with more economic uncertainty on the rise, healthcare is once again emerging as a major-business opportunity for agencies in the Bay Area looking for less volatility.

"Many people think of the Bay Area as only a tech hub," says Erik Clausen, VP of West Coast healthcare at Schwartz. "It's... become a center for the life sciences."

While the tech sector's vitality is directly linked to consumer spending, healthcare is better poised to weather economic turmoil, he adds. For instance, the aging boomer population has become a long-term market for pharmaceuticals and innovative medical devices. Also, because of regulations and testing requirements, the life cycle for biotech and healthcare products can exceed 10 years.

"There is already an expectation of working through something for years rather than months," says Clausen. "So there is less volatility in financing in the healthcare sector. Investors expect to see a product develop over decades unlike a new software product."

Even though the surge of biotech in the Bay Area coincides with agencies becoming skittish about the tech economy, some say it could be an accident of time. Carin Canale, president of Porter Novelli Life Sciences, says biotech companies are hiring PR firms to push products that have been in the works for more than 10 years.

"It's not the volatility of the tech sector that strengthened biotech, but it is the maturity of the biotech sector," Canale notes.

But even if the rise in biotech opportunities is a matter of timing, the growth does shift the region's dependency on consumer and enterprise tech. While Porter Novelli services biotech in the Bay Area from San Diego, she says the agency now has plans to expand its San Francisco office to include a larger life-science team.

"I think biotech will drive the growth of the Bay Area," she adds.

Kelly McKenna, co-director and VP of healthcare at MS&L, expects Bay Area firms to diversify further to include more general healthcare specialties outside of biotech. For instance, there are opportunities for healthcare firms to capitalize on the popularity of green by introducing practice areas that focus on bio-agriculture.

"I think these new offshoots are growing out of pure threat," she adds. "We've seen a lot of volatility in the tech market. So when you see a market like healthcare, it's... more stable and long term."

Additionally, expanding beyond biotech may offer more stability because of the high number of startups in the sector that are built on an exit strategy of acquisition. Similar to the challenge tech agencies face, when biotech startups are acquired, the PR agency risks losing the business.

One solution has been merging the Bay Area's emphasis on life sciences with the consumer-focused healthcare agencies in LA, McKenna says.

"Healthcare has always been big here because of the biotech market," she says. "But it's expanding beyond that, which gives a lot of opportunity to PR companies."

Key points:
Diversifying to healthcare practice areas could give tech firms more stability during a recession

Longer life cycles on bio-tech increase the likelihood that funding business can handle economic tumult

Biotech is a major practice area in the Bay Area, but there is an increased demand for traditional healthcare in the region

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