Updated from 5:14 p.m. EDT

ImClone Systems


said late Wednesday that CEO Sam Waksal has resigned from the troubled biotech company.

Waksal is stepping down to shield the company from his personal troubles, which include investigations into his sales of ImClone stock before the company's experimental cancer drug, Erbitux, ran into troubles with U.S. drug regulators.

Waksal's brother, Harlan Waksal, the company's current COO, has been named the new president and CEO.

"In light of recent events and the distractions they have caused, I am withdrawing myself from the daily operation of the company in the confidence that ImClone Systems will be able to maintain its focus on the advancement of our clinical development and research programs," said Sam Waksal, in a statement. "I fully believe that our product candidates, the most advanced of which is Erbitux, will have a profound effect on the way that patients with cancer are treated."

News of Waksal's resignation sent shares of ImClone sharply higher. The stock closed Wednesday up 78 cents to $10.90, but soared $1.37, or 14%, to $11.48 in after-hours trading.

"In the past, people have been concerned about the credibility of ImClone's management team," says Stephens biotech analyst Jason Zhang. He downgraded the company to neutral from outperform earlier today based on the news that ImClone and partner

Bristol-Myers Squibb

(BMY) - Get Report

are starting a new round of clinical trials for Erbitux. Stephens doesn't have a banking relationship with ImClone.

Zhang doesn't see Erbitux reaching the market in 2003, as the company predicts. Instead, he believes the drug won't be approved before late 2004, even 2005.

In March, a congressional committee investigating ImClone asked Sam Waksal to provide detailed

financial records and other information about his, and his family's, trading in the company's stock. The U.S. Department of Justice and the

Securities and Exchange Commission

also are conducting their own investigations.

Both Sam and Harlan Waksal are at the center of these inquiries because they sold as much as $150 million in ImClone stock before the Food and Drug Administration refused to accept Erbitux's approval application at the end of December. After the rejection, Bristol-Myers insisted the partnership be renegotiated, with one of its demands that both the Waksals leave ImClone, a condition the company's board rejected.

In March,

The New York Times

reported that Sam's daughter, Aliza, sold $2.5 million in ImClone stock on Dec. 27, the day before the FDA rejection was issued.

ImClone has lost 85% of its value since trading around $70 in the beginning of December.

Waksal's resignation comes just days after the company presented largely disappointing clinical trial results for Erbitux at the annual meeting of the American Society of Clinical Oncology. A phase III, controlled study testing Erbitux in head and neck cancer

failed, although other, earlier studies reported mixed findings.

Sources familiar with the situation say Bristol-Myers, frustrated by ImClone's inability to move the drug forward, is stepping in to take control of Erbitux's development. The start of new, large clinical trials suggests the drug giant has little confidence of getting the drug approved early next year. Waksal's resignation Wednesday likely bolsters that view.