Proxy advisory Risk Metrics, formerly known as ISS, has recommended that Amylin Pharmaceuticals Inc. (AMLN) shareholders elect three dissident directors after activist shareholders Eastbourne Capital Management and Carl Icahn "met their burden of proving that some change to the board is warranted."

Amylin, which sells diabetes drug Byetta with Eli Lilly & Co. (LLY), has been aggressively attempting to fend off Eastbourne and Icahn, with a combined stake of almost 22% of the company, from taking over the 12-member board.

Shares of Amylin, which closed at $10.50 Friday, have dropped 70% from an August high of $35.

The drop began when news of patient deaths led the U.S. Food and Drug Administration to start working with the companies to add stronger warnings about severe pancreatitis to Byetta's label.

The revision and the approval for Byetta's use as a monotherapy have been delayed for months, which has stoked worries of regulatory delays of a longer-acting version of Byetta, expected to launch in 2010. Amylin has repeatedly asserted that there remains no proven relationship between Byetta and pancreatic side effects.

But Eastbourne and Icahn have harshly criticized Amylin's spending, management and expertise to launch the longer-acting version of Byetta.

Risk Metrics recommended Amylin shareholders vote for Kathy Behrens and Chuck Fleishman, out of the three Eastbourne nominees, along with Alex Denner, one of two Icahn nominees.

The firm gave credit to Amylin for acknowledging its operational issues and for making several restructuring moves in recent months, but warned that those steps were made "under the harsh glare of a relatively high profile proxy fight."

Risk Metrics said that such "reactive steps" can actually help support the case for bringing in dissident directors in order to ensure that the progress continues.

The firm noted that Amylin's revenue growth since the 2005 launch of Byetta hasn't translated into improved financial performance and operating inefficiency is higher than similar companies.

"In comparison to its peers, Amylin appears to have had some difficulty controlling [selling, general and administrative]expense," the firm said in its report, noting that the new dissident directors would "likely prove beneficial to long-term shareholder value."

-By Thomas Gryta, Dow Jones Newswires; 201-938-2053; thomas.gryta@dowjones.com