Is it any wonder Wall Street banks keep ringing up

billion-dollar quarters?

Consider the sales prowess of the men and women who rounded up buyers last month for a 3 million-share offering of

IntraBiotics Pharmaceuticals

(IBPI)

. Anyone still holding those shares, which went out at $13 each, took a bath Wednesday, when the company announced it had stopped a clinical trial of its main product -- a drug that was supposed to prevent ventilator-associated pneumonia.

The bad news pummeled IntraBiotics, knocking the stock down $9.44, or 69%, to $4.24 at the start of trading.

The Palo Alto, Calif.-based biotech said it stopped the trial after an independent committee found that more people who had taken the experimental drug died from pneumonia than patients taking a placebo. Henry Fuchs, the company's president, says the disturbing results were "unexpected."

What's also unexpected is when a stock tanks so soon after a public offering. Especially since the underwriters are required to first do some basic due diligence about a company and its prospects.

Much as they might like to, frustrated investors will almost certainly find it impossible to hold deep-pocketed underwriters

Deutsche Bank

(DB) - Get Report

,

Lazard Freres

and

Piper Jaffray

(PJC) - Get Report

responsible.

A May 5 offering document appears to contain all the necessary red flags and warnings about IntraBiotics being a risky investment. Indeed, the very first factor mentioned in the offering statement says: "If either of our two pivotal clinical trials of iseganan for the prevention of ventilator-associated pneumonia, or VAP, or any future clinical trials of iseganan for other indications are unsuccessful, we may have to cease operations.''

Legal experts say that unless the underwriters were negligent in uncovering information that the clinical trial was likely to produce negative results, the investment banks are off the hook for damages.

"One of the most powerful defenses is the 'bespeaks caution doctrine,'" says Georgetown University Law School Professor Donald Langevoort. "It says it's not a fraud to mispredict the future, if you've given people adequate warning that the future is difficult to predict.''

Langevoort says the language in the prospectus for a stock offering is "carefully crafted to meet the bespeaks caution doctrine'' and is often successful in deflecting liability away from the underwriters. But Langevoort doesn't doubt that plaintiffs' lawyer will take a close look at the IntraBiotics prospectus, since the clinical trial results came out so soon after the offering.

A spokesman for Deutsche Bank, the lead underwriter, was unavailable for comment. Piper Jaffray lowered the stock to underperform Wednesday.