Pharmaceutical companies are faced with the challenge that only approximately 10% of compounds tested in costly clinical trials eventually become a new drug. Investment in early discovery research can decrease this attrition in late-stage R&D and focus resources on the best targets. Transgenic technology influences decision-making in target identification, target validation, and can also provide better models for human diseases, as well as models designed to alert researchers early about potential issues with drug metabolism and toxicity. Here we review how transgenic technology can reduce the late-stage attrition by increasing the quality of both the target and the compound.