Amylin Pharmaceuticals (AMLN)Proposal:

To elect the following 12 nominees to the board: A. Adams, S. Altman, T. Beck, D. Bradbury, P.Clark, J. Cook Jr., P. Costa, K. Eastham, J. Gavin III Ph.D., J. Skyler M.D., J. Sullivan, J. Wilson

Analysis:

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Board size: 12

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New directors since last year: 2

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Independent directors: 10

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Non-Independent directors: 2Non-Independent directors: D. Bradbury, J. Cook Jr.See the Board Profile above for additional detail.Unless there is evidence of a breakdown in board monitoring or effectiveness -- such as poor corporate performance relative to peers, excessive executive compensation, noncompliance withSEC rules or SRO listing standards, a lack of responsiveness to legitimate shareholder concerns,or various other factors -- we presume that the board is properly discharging its oversight role andthat it is adequately policing itself in terms of board organization, composition and functioning.

Performance

: According to PROXY Governance's performance analysis, the company hasoutperformed peers over the past five years; the company ranks at the 23rd percentile relative tothe S&P 1500 while its peers rank at the 5th percentile; the company is declining relative to peersat a rate of 14 percentile points per year.

Compensation

: The average three-year compensation paid to the CEO is 21% above themedian paid to CEOs at peer companies and the average three-year compensation paid to theother named executives is 23% below the median paid to executives at peer companies.The company's executive compensation appears reasonable given its financial performancerelative to peers.

Proxy Contest – Background

Eastbourne Capital Partners has been accumulating shares for several years and currently owns12.2% of outstanding shares across its several investment funds. Separately, Icahn Partnersbegan accumulating its 9.2% of shares in July 2007. The company has in force a poison pillwhich is triggered by any shareholder accumulating more than beneficial ownership of 20% of shares. As a consequence, the two dissidents have not joined forces to solicit proxies as agroup, as that term is defined under SEC regulations, but have pursued separate proxy contestincluding separate SEC filings and separate proxy cards.In January 2009 Icahn Partners announced it would file a dissident slate of 5 nominees for election to the 12-person board. Eastbourne had separately announced it would also nominate aslate of 5 dissident candidates. In both cases the number of nominees appears to have beeninfluenced by covenants in debt the company issued in 2007 which stipulated that election of 6 or more directors not approved by the board would trigger a “fundamental change” acceleratingrepayment of the notes. The same event would also trigger a “change in control” as defined under the company’s credit agreement, with similar consequences. In late March the San Antonio Fire &Police Pension Fund, a shareholder, filed a class action seeking to disable the debt provisions

related to election of directors, and a second action alleging that the incumbent board violated itsfiduciary duties by adopting the acceleration provisions in both the debt securities and the creditagreement, and by failing to approve the Icahn and Eastbourne nominees. On April 15, 2009, aspart of a settlement agreement, the company agreed to approve the dissident nominees. A trial onthe validity of the debt acceleration provisions was held May 4, 2009; a decision is pending.Prohibited by the poison pill from negotiating a single optimized dissident slate which would nottrigger the debt acceleration provisions, the two dissident groups engaged in what one participanthas ably termed a “kabuki dance” of press releases, SEC filings, and slate-trimming to achievethe same result. Eastbourne has now nominated three director candidates on its proxy card, andIcahn has nominated two different candidates on its card; each dissident’s proxy card now alsoseeks authority to vote in favor of the other dissident’s candidates – though not by naming thosecandidates, which under SEC regulations might make the two parties a single group withbeneficial ownership above the 20% poison pill threshold.

Proxy Contest – Dissident View

The dissidents argue the board is underequipped to transform the company from its long initialphase as an R&D house into a viable commercial entity which delivers the shareholder valueembedded in the products it has developed.In particular, they point out, this problem has been manifested in a confused sales strategy andweak performance on Byetta, which equity analysts had forecasted to reach nearly a billiondollars in sales by 2008. Instead the company missed its own 2007 and initial 2008 guidance –eventually realizing sales of $679 million in 2008 – and declined to provide revenue guidance for 2009. This was in part to a “faulty partnership” with marketing partner Eli Lilly which did notproperly align Lilly’s priorities with the product’s potential, inappropriately allocated marketing andsales responsibilities between the two unevenly sized partners, and resulted in the creation of a“redundant commercial organization” which was restructured multiple times in the last year,before being cut by one-third in early May. Noting that “even large pharmaceutical companies likeBristol Myers partnered their diabetes drugs,” the dissidents contend that the decision to build aprimary care sales force was flawed from the outset, driving significant cost. 2008 SG&A was47% of sales, versus 15% - 31% for 6 biopharmaceutical peers – which kept the company bothunprofitable and unable to generate cash from operations. In 2008 the company’s SG&Aspending had the lowest returns among the broad group of 16 peers it identifies in its own proxystatement, at just a little more than $1 in revenue per $1 in SG&A spent.The partnership may have been suboptimized, the dissidents observe, because of pervasive linksbetween Lilly and both executives and directors. Chairman and former CEO Cook was a 28-year Lilly veteran, new SVP and Chief Commercial Officer Vince Mihalik left Lilly after 8 years to takethis post, and four other current or former directors and executives had significant prior Lillyexperience. Successfully managing the partnership with a large pharmaceutical, however,requires not an equal distribution of marketing costs and responsibilities – ignoring the relativeresources of the two parties – but the ability to “hold Lilly’s feet to the fire” on marketing prioritiesand execution. In their experience at ImClone, assert the Icahn nominees, it was exactly thedissident directors’ ability to “recharge partner relations” which led to expanded sales, ultimatelymaking that company an attractive acquisition candidate for large pharma. ImClone was sold toEli Lilly in 4Q 2008 for $70 per share, a 126% premium to the trading price when those dissidentstook seats on the board two years earlier.The board’s unpreparedness was starkly apparent in the 5-point plan it has put forth. Whilereturning Byetta to growth should clearly be the first priority, the dissidents note, management hasnot articulated any specific steps it will take to meet this objective – particularly worrisomebecause “scripts have been flat for the last 2.5 years despite multiple initiatives.” Continuing the“growth” in Symlin, whose total prescriptions have been down sequentially for three quarters in arow, only begs the question “what growth management is planning to continue.” While achieving

positive operating cash flow by the end of 2010 sounds laudable, “the real issue is management’sinability to grow revenues within an appropriate cost structure.”A board which has had such difficulty managing the marketing partnership with Lilly, thedissidents contend, and put forward an operating plan that only raises more questions about itsoversight, is not a board equipped to successfully launch an even more compelling product,Exenatide. A once-weekly version of Byetta, Exenatide not only has the same ancillaryadvantages – including promoting weight loss - but has shown increased efficacy even over Byetta. The risk to shareholders is not a market failure of the new drug: sample medical reviewsof clinical findings include comments from one former ADA president for Medicine and Sciencethat the weight loss and A1c control combination “is the kind of stuff that makes clinical investor’shair on the back of their necks stand up.” The risk instead is a repeat of the Byetta experience inwhich significant clinical advantages yielded commercial results far below their potential.To address this need for stronger board experience and oversight of the transformation from R&Dhouse to successful commercialization, Eastbourne has nominated three candidates:

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M. Kathleen Behrens, 56, is currently a consultant for and was formerly a managingdirector of RS Investments, and had previously been a general partner and securitiesanalyst with Robertson Stephens & Co., focusing on life sciences investments. She iscurrently a director on one other public company board, and has helped found or servedon the boards of several life-sciences companies

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Charles M. Fleischman, 51, retired as president, CFO and COO of biotechnology medicaldevice company Digene Corp., and is currently a director of Dako A/S, a global leader intissue-based cancer diagnostics.

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Jay Sherwood, 40, is a managing director of Eastbourne Capital, and has been anexecutive with several other investment management firms.In addition, Icahn has nominated two candidates whose experience in rejuvenating ImClone’srelationship with its much larger pharmaceutical marketing partner would be directly relevant tothe company’s similar challenges:

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Alexander J. Denner, 39, is a managing director of entities affiliated with Carl C. Icahn,and has previously served as a portfolio manager of healthcare and biotechnology fundsfor Viking Global Investors and Morgan Stanley. He is currently a director of one publiclytraded biopharmaceutical company and was formerly a director of ImClone Systems Inc.

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Thomas F. Deuel, 74, is currently a professor of Molecular and Experimental Medicineand Cell Biology, Director of the Division of Molecular Oncology, and Director of theVascular Biology Affinity Group at The Scripps Research Institute. He was previously aprofessor at Harvard Medical School and the Washington University School of Medicine,and was formerly a director of ImClone Systems Inc.

Proxy Contest – Management View

The company contends that the future for Exenatide is bright not only because of its significantclinical advantages, but because the company has both addressed suboptimal structure in itscommercial organization and, in step with those changes, improved its relationship with Lilly.The company recently reduced its sales force by 200 – a 35% reduction which will eliminateapproximately $45 million in annual ongoing costs – and is redeploying its internal sales force totarget the 30,000 key physicians who currently represent more than 70% of Byetta revenues.Those sales efforts will be complemented by the efforts of a Lilly sales force calling on thebroader market of approximately 40,000 personal care physicians who also prescribe for diabetespatients. Both sales forces will be integrated through single marketing, development, and medicalteams which each have undivided accountability for decision-making and execution. Thecompany has also hired a seasoned pharmaceutical marketing executive, Mihalik, to oversee