Biotechs can offer insane returns in a very short time, sometimes overnight doubles or triples. But, they also offer plenty of heartache. In both cases there are plenty of lessons to be learned.

And, by the way, I'm using the more liberal definition of biotech -- anything that's drug-related that isn't a pharmaceutical company -- rather than the traditional definition of a company that makes protein-based biologics. Pharmaceutical companies will get their day in the spotlight in an upcoming article -- whether they want it or not.

Where good drugs go to ... live?
Not many people had hope for Human Genome Sciences' (NASDAQ:HGSI) Benlysta -- myself included. After seeing so many drugs fail to show an effect in lupus patients, I concluded that lupus was the disease where good drugs go to die.

But lo and behold, Benlysta's first phase 3 came up positive, giving Human Genome Sciences' investors an overnight triple. The trial gave the company, along with marketing partner GlaxoSmithKline (NYSE:GSK), a little more confidence, but a second trial was still ongoing.

But lo and behold, that one worked, too. The company now trades more than 6,000% higher than its 52-week low.

Moral of the story: Perhaps there are two. Don't disregard a company just because of the disease it treats; it might get cheap enough to justify the risk. Alternatively, if you're going to ignore it, don't beat yourself up. There are other fish in the sea.

The schizophrenic Food and Drug Administration
Vanda Pharmaceuticals had been left for dead. Trading at less than cash on hand, its largest shareholder, Tang Capital, called for Vanda to liquidate rather than continue pursuing the approval of its schizophrenia drug Fanapt, which had already been turned down by the FDA.

But Vanda got a Christmas miracle in May when the FDA reversed course and approved Fanapt. Tang Capital ended its proxy fight, and investors lived happily ever after. Well, at least so far.

Moral of the story: Nothing is a guarantee when the FDA is involved. That goes for seemingly guaranteed approvals as well.

How to lose 75% of your company's value overnight
Sequenom (NASDAQ:SQNM) was flying high coming into 2009. Data for its blood test for Down syndrome suggested it was nearly perfect without the risks associated with amniocentesis.

Then the company announced that the results couldn't be trusted because of "employee mishandling of R&D test data and results." We still don't know what the heck that actually means, but the CEO and a few senior officers are gone, and the fate of Sequenom's Down syndrome test is uncertain at this point.

Moral of the story: No matter how much research you do on a company, there are still plenty of things that are completely out of your control. Stay diversified, because something is bound to blow up.

A train wreck
Genzyme (NASDAQ:GENZ) lost it this year. From failing to get an approval of its own drug manufactured at a larger scale, to a viral contamination, to bits of steel, rubber, and fiber in its drug vials, train wreck might be an understatement.

Moral of the story: Sometimes even great stock stories falter. Let's hope the moral of Genzyme's 2010 is that "comebacks can happen."

Bone up on this one
Amgen's (NASDAQ:AMGN) bone drug, Prolia, might have had the most anticipated approval for this year, but the FDA didn't give it an approval on its first pass. The agency wants a Risk Evaluation and Mitigation Strategy (REMS) to make sure the drug gets to the right people.

Amgen will likely get an approval next year, but for now it's still waiting to launch Prolia into a market that's produced plenty of blockbusters, including Eli Lilly's (NYSE:LLY) Evista and Merck's (NYSE:MRK) Fosamax.

Moral of the story: Drug companies have to dot their I's and cross their T's. Investors need to be conservative and factor delays into their valuations of drug developers.

So there you have it, a review of some of the bigger biotech stories of 2009. Will 2010 be just as exciting? Considering that it's biotech, I'd have to say "yes."

Did I miss any highlights during the year? Let us know in the comments box below.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.