A mechanism-based biomarker model of TNFα-response, including different external provocations of LPS challenge and test compound intervention, was developed. The model contained system properties (such as kt, kout), challenge characteristics (such as ks, kLPS, Km, LPS, Smax, SC50) and test-compound-related parameters (Imax, IC50). The exposure to test compound was modelled by means of first-order input and Michaelis–Menten type of nonlinear elimination. Test compound potency was estimated to 20 nM with a 70% partial reduction in TNFα-response at the highest dose of 30 mg·kg−1. Future selection of drug candidates may focus the estimation on potency and efficacy by applying the selected structure consisting of TNFα system and LPS challenge characteristics. A related aim was to demonstrate how an exploratory (graphical) analysis may guide us to a tentative model structure, which enables us to better understand target biology. The analysis demonstrated how to tackle a biomarker with a baseline below the limit of detection. Repeated LPS-challenges may also reveal how the rate and extent of replenishment of TNFα pools occur. Lack of LPS exposure-time courses was solved by including a biophase model, with the underlying assumption that TNFα-response time courses, as such, contain kinetic information. A transduction type of model with non-linear stimulation of TNFα release was finally selected. Typical features of a challenge experiment were shown by means of model simulations. Experimental shortcomings of present and published designs are identified and discussed. The final model coupled to suggested guidance rules may serve as a general basis for the collection and analysis of pharmacological challenge data of future studies.