If he had done, he'd very likely have won. He'd certainly have won a two-way contest with Michael Howard, because the Tory membership unsurprisingly like him more.
The only thing that could have stopped him is coming third in the MPs' vote to select the two candidates for the members to chose between, a la Michael Portillo last time.
(IDS beat Portillo by 'one MP' and went on to trounce Ken Clarke. Apparently, if Portillo had been more polite to Boris Johnson, it'd have been the other way around. But who could resist being rude to this particular unlovable mop-head?)
David Davies would love to be PM. Hence the only reason not to stand is that you don't think the Tories have any hope of winning next time...
... so he's waiting for Howard to lose and stand down, and go for the election after next. Assuming they both keep their seats, of course, as they're both vulnerable to the LibDems.
Speaking of which anyone know just why the otherwise very smart Chris Reynard called one LibDem in Howard's constituency a 'candidate'? If you don't know UK election law, that's a very silly thing to do, because once you're a declared candidate, all your expenditure counts against the small total you're allowed to spend. True, it wasn't the man himself saying it, but having your party's head of campaigning calling you the candidate must come pretty close to a declaration.