Pharmacokinetic and pharmacodynamic studies have an important role in the optimization of targeted agents. Phase I pharmacokinetic studies show that treatment with erlotinib HCl (Tarceva; Genentech Inc, South San Francisco, CA), an orally available epidermal growth factor receptor (HER1/EGFR)-tyrosine kinase inhibitor, on a daily, uninterrupted schedule is feasible. Also, plasma drug concentrations, likely to be clinically effective based on preclinical studies, are consistently achieved at the recommended phase II dose of 150 mg/day, the maximum tolerated dose. Pharmacodynamic studies are in progress to assess the activation of HER1/EGFR and associated downstream signaling pathways in tissue samples from patients treated with erlotinib. Expression of p27 is identified as a potential surrogate marker of erlotinib activity, and is a focus of ongoing and future studies. Also, studies indicate that skin may be a useful surrogate tissue for evaluating the pharmacodynamic effects of therapy. These studies will hopefully enable us to accurately assess the extent of target inhibition in patients treated with erlotinib and help optimize its clinical use.