Amylin Pharmaceuticals has been talking to dissident shareholder Carl Icahn and rejected plans he put forward to try and sell the company to Eli Lilly, its partner on the diabetes drug Byetta.

In a letter released to the US Securities and Exchange Commission, Amylin director James Wilson noted that he and chairman Joseph Cook have been talking on the telephone to Mr Icahn. Last week, the billionaire investor, who nominated five new directors in a proxy fight with the Amylin board, vehemently criticised Mr Cook’s chairmanship and called for his resignation.

Mr Wilson’s letter claims that Mr Icahn informed the pair “that you intend to leverage your relationship with our partner Lilly to promptly attempt to sell Amylin”. However the board believes that “a sale of the company today would dramatically undervalue the opportunity shareholders will have through the approval and launch” of the once-weekly version of Byetta (exenatide once weekly).

Mr Wilson also wrote that “your desire to sell Amylin is inconsistent with what you have said previously and we continue to believe that this is not the time to consider such an action”. Mr Icahn took over ImClone Systems in October 2006 then sold it to Lilly in late 2008 for $6.5 billion.

Mr Icahn has also allegedly told the two directors that he would immediately cut costs by an additional 30%, specifically in areas such as insurance and logistics. However Mr Wilson writes that this would “undermine our efforts to develop, prepare for and launch exenatide once-weekly, which represents a major transformational opportunity for the treatment of type 2 diabetes”.

He said that “a thoughtful and strategic manner” led to a restructuring last year, resulting in the reduction of 25% of its workforce in San Diego and in the first quarter of 2009, operating expenses declined 16% compared to the same period last year.

Somewhat mischievously, Mr Wilson ends by saying that on the phone call, Mr Icahn asked “Who is Dan Bradbury?” The letter explains that Mr Bradbury is Amylin’s president and chief executive and Mr Wilson says that a meeting with the latter “would go a long way in helping you to better understand Amylin’s business and our strategy”.

There has been no response as yet from Mr Icahn, who holds a 9% stake in Amylin. However analysts at BMO Capital Markets said a sale to Lilly was unlikely, "at least not before exenatide LAR is approved and launched".

They added that while Mr Icahn sold ImClone at a premium, this was "largely because Lilly was desperate in building its biological oncology franchise". It is a in far better position in the field of diabetes than cancer and "wven if it happens, the premium wouldn’t be to the satisfaction of current shareholders".