The public markets for health care companies are not as forbidding as they appear.

That was the sentiment of public-market investors during a panel discussion at yesterday's Dow Jones Healthcare Innovations conference in Redwood City, Calif.

Kurt von Emster, general partner of MPM Capital and manager of the firm's MPM BioEquities fund, which is used to invest in public and private companies, said that while the environment for initial public offerings hasn't been particularly robust, some companies have traded up after they've gone public. This should help late-stage private companies to go public in the coming months, he suggested.

In April, for example, obesity-drug maker Orexigen Therapeutics Inc. went public at $12. The company, whose venture backers include Domain Associates, Kleiner Perkins Caufield & Byers, Sofinnova Ventures, and others, closed yesterday at $16.28.

Not all companies, of course, have enjoyed such a quick run-up after their IPO. Jazz Pharmaceuticals Inc., for example, priced its IPO originally in the $24 to $26 range but went public at $18 on June 1 and closed yesterday at $17.

To avoid this problem and improve their chances of trading up, more companies are setting their IPO prices low, panelists said. Von Emster said he recently spoke with executives of one company who said they were projecting their IPO valuation to be only 1.5 times greater than the valuation of the mezzanine round they were raising, for example.

Some venture capitalists are buying stock at their companies' IPOs in expectation of strong performance. Evan McCulloch, portfolio manager and analyst with Franklin Templeton Investments, said venture firms participating in an IPO can be seen as a vote of confidence in the company.

But it also creates questions about how firms will manage and ultimately sell their massive stakes in the company, he said. He added that he prefers to see venture capitalists get off the boards of companies after the public offering to make way for independent board members and those with more operational experience than many venture investors possess.

One trend working in VCs' favor is that crossover investors are increasingly active in backing companies that are near a public offering. In particular, mutual fund companies such as AllianceBernstein have set up venture programs recently to back late-stage companies. Von Emster said crossover investors can create a buzz about a private company on Wall Street, improving the chances of a successful IPO.

Companies also shouldn't be looking at IPOs as their only option. Von Emster tells all of his companies to pursue a dual-track process of considering an IPO or merger opportunities with large corporations.