After being beaten down during the first three months of the year, biotech stocks made a remarkable rebound over the past few days. Though iShares Nasdaq Biotechnology (IBB) is still down 17% in the year-to-date frame, it posted an increase of 5.9% on Wednesday, witnessing the best percentage gain since March 12, 2009. In fact, the 7.9% rise in IBB over the past one-month period also propelled healthcare mutual funds, which gained 2.9% during the same period. Mutual funds from this category may be profitable for investors, who are looking to gain from this encouraging trend.

Reasons for the Recent Surge

Strong gains of 5% and 3.5% respectively in Pfizer Inc. (PFE –Analyst Report) and Allergan plc ( (AGN- Analyst Report) played an important role in lifting biotech stocks on Wednesday. The increase was prompted when the companies mutually called off their merger after tougher tax inversion rules were imposed by the U.S. Treasury Department and Internal Revenue Service.

Leaving the deal behind, Allergan CEO Brent Saunders said that the company, “could act immediately if” it gets “the right opportunity with the right growth profile and the right strategic logic.” Meanwhile, it is now speculated that names of other UK-based firms like GlaxoSmithKline plc ( (GSK – Analyst Report) are on Pfizer’s radar.

Moreover, a surge of nearly 17% in shares of Edwards Lifesciences Corp. (EW –Analyst Report) gave a boost to this sector. According to the company, data from the trial revealed that a procedure which uses its SAPIEN 3 valve shows better results than open heart procedures for certain patients.

What’s Ahead?

In spite of the recent surge, some of the concerns that affected the performance of biotech stocks at the start of 2016 may continue to impact the sector in the near future. Calls for reducing the prices of several drugs had played an important role in dragging down the sector. Hillary Clinton’s comments on the prohibitive pricing of certain medications drew much attention last year, weighing down on the sector’s stocks. Moreover, the U.S. Treasury Department’s adaptation of new rules to contain inversion-related deals may lower the volume of overseas merger and acquisition deals in the near term.