Many experts agree that personalized cancer medicine, defined here as treatment based on the molecular characteristics of a tumor from an individual patient, has great potential in the therapy of many types of cancer. Although targeted therapy agents are increasingly available for clinical applications, many of these promising drugs have produced disappointing results when tested in clinical trials, indicating that there are many challenges that must be addressed to advance this field. We propose that a new generation of clinical trials requiring biopsies to obtain relevant tumor specimens, as well as novel statistical designs, will be essential to improve treatment outcomes. However, these novel clinical trials will only be successful if appropriate biomarkers are identified to help guide the selection of the most beneficial treatments for the participating patients. Although biomarkers based on single gene mutations are the most commonly used in clinical applications today, gene-expression or protein-expression 'signatures' and new imaging technologies have the potential to play important roles as biomarkers in the future. Therefore, it is of crucial importance that we identify and resolve existing challenges that may impede the rapid identification and translation of validated biomarkers with acceptable sensitivity and specificity from the laboratory to the clinic. These challenges include limitations of current biomarker development methodologies and regulatory and reimbursement policies and practices.