During the past decade remarkable progress in molecular genetics and the possibility of manipulating cells so that the expression of genes can directly 'report' on drug activity has produced major changes in drug development strategies. The recent description and pharmacological validation of reporter mice for in vivo analysis of hormone receptor activity opens new horizons for drug discovery. These novel animal models, in association with in vivo imaging technologies, provide a global view of the target tissues of drug action following acute and repeated drug treatment, thus enabling the prediction of potential side-effects in the early phase of preclinical studies. It is anticipated that further improvements of transgene architecture will lead to models that combine pharmacokinetic, pharmacodynamic and toxicological studies in a single step, which should provide a tremendous saving in time and, paradoxically, the number of animals to be sacrificed in the development of novel pharmacologically active molecules.