It looks like an especially cruel summer lies ahead for XBiotech Inc. (NASDAQ:XBIT), Merrimack Pharmaceuticals Inc. (NASDAQ:MACK), and NewLink Genetics Corp. (NASDAQ:NLNK). The market has already dragged these biotechs out behind the tool shed and spent a few months beating down their share prices. But before we write them off altogether, let's look past the headlines to see if there might be something salvageable from the wreckage of these stocks.

Biotech scientist after something went terribly wrong.

Image source: Getty Images.

1. XBiotech: Inexcusable offense 

Shortly after this biotech made its stock market debut in 2015 investors pushed its market cap above $650 million. Unfortunately, a series of clinical trial failures has reduced that figure to about $150 million recently.

Last summer, seasoned biotech investors shook their heads in disgust after the company presented late-stage clinical trial data for its lead candidate, Xilonix. According to XBiotech, colorectal cancer patients with tumors that responded to Xilonix survived 2.7 times longer than patients with unresponsive tumors. This would make an encouraging note -- if accompanied by data that also showed a significant survival benefit among Xilonix treated patients versus those given a placebo for the first eight weeks of the study.

Although it wasn't the trial's main goal, significant survival benefits over control groups are regulators' preferred currency. Following XBiotech's willful omission of the figure, nobody should have been surprised by Xilonix's recent failure, but it seems to have caught investors off guard. When the company terminated the trial earlier this month, the stock plunged another 66% overnight.

The company still has a novel antibiotic in mid-stage clinical trials. Plus, Xilonix is in a handful of mid-stage studies as a potential treatment for an unusually wide variety of maladies including lung cancer, diabetes, and acne. The XBiotech show isn't over yet, but its tarnished reputation makes it a stock to avoid at any price.

Scientist inspecting a vial.

Image source: Getty Images.

2. Merrimack Pharmaceuticals: They took the money and ran

In January, this cancer-focused biotech sold off Onivyde, its first drug to earn FDA approval, to Ipsen as part of a deal for $575 million up front, plus potential milestone payments. The company used the sale proceeds to pay off debts, shore up its balance sheet, and reward investors with a $140 million special cash dividend that worked out to $1.06 per share.

It looks like investors used the cash to hail an Uber and flee the scene. Merrimack stock has retreated about 65% since the company distributed the funds, pushing its market cap down to a paltry $156 million. That seems awfully cheap for a company still entitled to about $450 million in potential milestone payments that trigger if Onivyde can cross certain regulatory hurdles. The company's pipeline also contains two cancer therapy candidates in mid-stage trials that should produce some data next year, and a third slated to begin its first clinical trial.

At its beaten down price, just one clinical trial success or a big milestone payment could lead the stock to big gains from recent levels, but the risks are enormous. Although it used $175 million of its Onivyde proceeds to pay down some debts, it was deep in the hole to begin with. At the end of the first quarter, total liabilities exceeded total assets by $277 million, and the company lost about $29.7 million during the three month period. Until we see more data for Merrimack's new drug candidates, even the most courageous investors might be better off watching from the sidelines.

3. NewLink Genetics: Not over yet

This stock tanked earlier this month after multinational healthcare giant Roche pulled the plug on a collaboration deal involving one of two experimental therapies NewLink has in clinical trials. The immuno-oncology focused biotech will regain rights to GDC-0919, an IDO inhibitor that makes it harder for cancer cells to avoid an immune system attack, and it still owns indoximod, which aims to fight cancer in a similar manner.

With two immunotherapies in clinical-stage development, NewLink's recent enterprise value of about $67 million is so low it seems like a mistake. That is until you consider some recent data from both of its candidates.

Roche handed back GDC-0919 after it shrank just 10% of patients' tumors when administered in combination with Tecentriq. A few days later, NewLink announced indoximod's failure to cross any of the three main hurdles used to measure cancer drug efficacy in a trial on a group of breast cancer patients.

While NewLink certainly appears to be in a tight spot at the moment, you should know that Roche threw the GDC-0191 and Tecentriq combo in the ring with 61 heavily pretreated patients suffering from a variety of different solid tumors. Also, indoximod may have flopped in the breast cancer setting, but earlier results from a melanoma study were impressive. Finally, NewLink's pact with Roche to discover new IDO inhibitors remains intact.

Although it doesn't look like the odds of success are in NewLink's favor, the show isn't over yet. At such a beaten down stock price, any success could lead to huge gains. That said, it might be best to watch from the sidelines for more data.

Cory Renauer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.