The pull of JPM may be irresistible, but will San Francisco’s problems push people away?

SAN FRANCISCO — If you were to ask health-care and biotech executives where they want to be next week — where they truly want to be — they will not say San Francisco. Anywhere, they will say, but San Francisco.

There’s the garbage and the human excrement on the sidewalks. There’s the mad dash to try find available accommodations. There’s the panhandling, evidence of the city’s handling of its worsening homelessness crisis. Oh, and there’s the $14,000 meeting cubicles and the coffee, available (this is true) for $170 per gallon.

And yet everyone who’s anyone will be here during the four days of “JPM Week” — the biotech industry’s largest and most important business and networking meeting, headlined by the J.P Morgan Healthcare Conference.

The pull of the conference is irresistible, and has been since its founding in 1983. It is the first health-care conference of the year, where companies and investors set expectations for the rest of the year. Licensing deals and acquisitions valued in the billions of dollars can be traced back to meetings first held during JPM Week.

But the soaring costs of JPM Week have also made attending nearly untenable. A company’s bill can run to six figures for a slate of executives when hotel bills and meeting space fees are tallied. The crowding of JPM Week underlines San Francisco’s relative lack of hotel space and its municipal challenges with homelessness and open drug use.

The push and pull of JPM Week has some longtime attendees wondering: Is it time for biotech’s banner meeting to find a new host city?

“Wearing my public investor hat, the marginal utility of attending JPM has been going down,” said Les Funtleyder, health-care portfolio manager with E Squared Capital. “Prices have skyrocketed to the point of being insulting.”

But don’t expect action to be taken anytime soon. J.P. Morgan, the Wall Street investment bank, is committed to keeping its signature health-care investor conference at the Westin St. Francis hotel for at least another 17 years, according to a former J.P. Morgan executive familiar with the long-term contract signed with the Union Square hotel — the only place ever to host the the conference in its 37-year history.

Relocating the conference to a larger venue within San Francisco was considered, but none of the city’s other hotels or convention spaces could meet the bank’s calendar and space requirements, the J.P. Morgan executive said.

What about leaving San Francisco? “There is no way that would ever happen,” the J.P. Morgan executive said.

A spokesman for J.P. Morgan declined to answer questions about the bank’s contract with the Westin St. Francis.

Meanwhile, the calls to relocate JPM Week to Orlando, Las Vegas, or San Diego — cities where hotel rooms are plentiful and that can better accommodate crowds of business travelers — are growing louder.

$2,200 handbags and open drug use

JPM Week happens in San Francisco’s Union Square neighborhood. It’s a district bustling with office workers and tourists, and clustered with high-end shops: In the Moreau Paris storefront adjacent to the Westin St. Francis, leather handbags starting at $2,200 a pop gleam in the window display.

But the sparkling center of Union Square is just blocks from the Tenderloin, a district marked by rampant homelessness and open drug use. On a Wednesday afternoon in December, a man could be seen urinating while he stood on the sidewalk a 15-minute walk from the Westin St. Francis. And the contrasts between the city’s wealth and its poverty are striking: In about the same spot that same afternoon, a tent could be seen erected on the sidewalk, just a few feet from a gleaming black Volvo decorated with fuzzy brown reindeer antlers.

That means JPM Week attendees flitting in and out of meetings get up close and personal with the city’s social ills.

“The reality is that the city is bad,” said Jennifer Friedenbach, executive director of the Coalition on Homelessness, a local advocacy group. “It’s a very affluent city that has severe destitution, and the city has neglected the needs of the most impoverished residents for decades, and the result has been very devastating.”

The city contracts out its direct homeless services to a nonprofit group, which staffs the Homeless Outreach Team — foot soldiers in the fight to get a handle on homelessness. A spokesperson for the city didn’t return STAT’s request for comment about whether the team would be doing anything differently during JPM Week.

In Union Square, a group known as the Union Square Business Improvement District collects dues from the neighborhood’s property owners to deliver cleaning and safety services. That means staffing about 30 “ambassadors” — perhaps six to 10 of whom are out at any given moment — who sweep and pressure-wash the sidewalks, paint over graffiti, stack strewn scooters, and confront aggressive panhandlers. The group also pays a city police officer — essentially working a side gig — to patrol Union Square during business hours every day.

The group is not planning to staff up for JPM Week, nor has it done so in the past. But it expects to have a few more police officers patrolling Union Square during the conference for an unrelated reason: The group has leftover grant money from a safe shopper holiday season program, according to Karin Flood, the group’s executive director.

Despite these efforts, some organizations are pulling out of San Francisco’s troubled downtown area. The music-streaming company Spotify this past November abandoned its offices in the city’s Mid-Market neighborhood — and the accompanying tax breaks — because of safety concerns.

Last summer, a major medical association pulled its annual convention out of San Francisco because its members no longer felt safe walking the streets, the San Francisco Chronicle’s SF Gate reported, marking a threat to the city’s multibillion-dollar tourism industry.

And some JPM Week attendees would like to see biotech follow suit.

“I’d be happy if the conference was in another location,” Baird biotech analyst Brian Skorney said. “I really don’t like San Francisco anymore. I don’t know if the city has gotten dirtier or I’m just unlucky to be accosted by more homeless people, but it is starting to bother me more. The conference has grown too big for its location, and that is a problem.”

But Joe D’Alessandro, head of the city’s convention bureau, said JPM Week attendees will find “an improving city” when they return to San Francisco this year.

“The city’s under a lot of pressure because the economy has been so incredibly strong, and it has created the highest cost of living in the United States, but I think we’re getting that under control,” said D’Alessandro, who is president and CEO of SF Travel. “The fact of the matter is that the city has been improving.”

The price companies pay

Thousands of biopharma executives, venture capitalists, bankers, investors, and other related industry professionals are expected to attend the conferences, panels, networking events, private deal meetings, dinners, and cocktail parties that collectively comprise JPM Week. The health-care investor conference put on by J.P. Morgan, with an estimated attendance of nearly 9,000 people, is like the sun around which all the other activities during the week revolve. If the bank stays put, so does everything else.

And that means putting up with ever-increasing costs and the city’s urban problems.

The trip to San Francisco is getting harder to justify each year, executives and investors told STAT. Take the aforementioned $170 gallon of coffee. That’s what the Parc 55 hotel is charging to any company or group holding a JPM Week event at the property, according to a catering menu obtained by STAT. The markup is astounding: $21.25 for a 16-ounce cup of joe — equivalent in volume to a grande-sized brew from Starbucks.

A Cambridge, Mass.-based biotech, which asked to remain unnamed, is sending seven employees to San Francisco to meet with investors and potential partners. The company decided against renting out meeting space after learning that its JPM Week home in the JW Marriott hotel was charging $14,200 for one of seven semi-private booths squeezed inside a single banquet room. Food and beverage: extra.

A suite converted into private meeting space in the same hotel costs $30,000.

“This has caused us headaches, but thankfully, some of our investors have their own meeting rooms,” said the company’s head of investor relations. “Otherwise, I have some secret spots where we can do free meetings.”

Biotech Showcase, the second-largest conference held during JPM Week, has seen its operating costs rise by 60 percent in the last three years, mostly tied to securing hotel rooms and meeting space at its two hotels, the Parc 55 and the Hilton San Francisco Union Square, founder Sara Jane Demy told the San Francisco Business Times.

“I understand why hotels want to take advantage of it, but they’re kind of killing off the golden goose,” Demy said.

Then there’s the San Francisco hotel that is charging a biotech research firm to set up its JPM Week meeting space, including nearly $400 in labor costs for workers to plug in 14 electric power strips. That’s on top of the nearly $600 required to rent the power strips from the hotel.

“These prices are f—ing insane, but we’re paying them,” the firm’s director of research said, exasperated.

But why?

Is it worth it?

“I go to JPM Week because everyone else goes,” added the director of research. “I can have 60 meetings in three days, including companies that may not come to New York City — private or Asian companies that find it easier to get to San Francisco. In this respect, attending JPM is worth it.”

In January 2015, Michael Gilman, then CEO of the biotech startup Padlock Therapeutics, spent his JPM Week meeting with business development executives from 19 pharma companies. One of those introductory meetings was with Bristol-Myers Squibb. One year later Bristol struck a deal to acquire Padlock for $600 million acquisition.

“There is no more efficient way of getting in front of pharma decision-makers than spending three days at J.P. Morgan,” Gilman said. He’ll be in San Francisco again this year as CEO of two biotech fledglings, Obsidian Therapeutics and Arrakis Therapeutics.

Health-care investor Oleg Nodelman, portfolio manager at EcoR1 Capital, describes JPM Week as “being shot out into the new year from a cannon.”

“Most of the health-care entrepreneurs and investors in the free world gather here in San Francisco for a week of networking. I like that week because it is hyper-efficient. There is so much going on, that it is very hard to focus. On the other hand, we have so much throughput in terms of companies we are meeting with and friends in the business we are catching up with that it becomes crystal clear what is interesting and what is horrible,” he said.

So, again, why does the biotech industry fly out to San Francisco to attend JPM Week despite the profiteering, the crowds, and the unsafe streets? And why, despite the growing resentment and complaints, will people continue to go?

The simple answer: FOMO — fear of missing out.

Said biotech analyst Skorney: “I don’t look forward to it, and it is the most difficult week of the year for me, but I have never not gone in my sell-side career and it would seem difficult not to go.”