Howard Greene, the co-founder and former chief executive of Amylin Pharmaceuticals Inc. (AMLN) has resigned from the drug maker's board and is opposing the re-election of the company's current chairman in the looming proxy fight with activist shareholders.

Greene, who remains a major shareholder with a 1.2% stake, resigned after the board decided not to include him on the San Diego company's slate of directors. Greene founded the company in 1987 and stepped down as chief executive in 1996.

Amylin, which sells diabetes drug Byetta with Eli Lilly & Co. (LLY), is trying to fend off Eastbourne Capital Management and billionaire Carl Icahn, with a combined stake of almost 22% of the company, from taking over the board.

An Eastbourne spokesman called the move a "tribute to Mr. Greene's integrity," but declined further comment. Icahn was was unavailable for comment.

The board justified dropping Greene as an attempt to field the best slate of nominees and noted shareholder displeasure with having three former chief executives on the board.

Another former chief executive, Ginger Graham, also was not included on the company slate. The third, Joseph Cook, is currently chairman and is standing for re-election.

Greene, in his resignation letter, argued against the re-election of Cook, because he "has presided over the loss of shareholder value that sparked the proxy fight."

Shares of Amylin, which closed at $9.66 Thursday, have dropped 72% from its August high of $34.80.

The drop began when news of patient deaths led the 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.

In resigning from the board, Greene said he will not vote his shares to re-elect Cook in May, and he expects to be a "proactive outside shareholder with an important equity position" now that he has left the board. It remains unclear if he will support the other members of Amylin's slate.

Greene expressed frustration with the nominating process, contending that the board was not receptive to his ideas and that he is unsure about the two new independent nominees.

"My departure from the board has reduced director ownership of AMLN stock by over 50%. Such a large reduction in board shareholdings cannot be reassuring to investors who are concerned about board alignment with their financial interests," Greene wrote.

Amylin has said that the nominees, Paul Clark and Paulo Costa, were recommended by an independent executive search firm.

Clark is the former chief executive of Icos Corp., which was bought for $2.3 billion in 2007 by Byetta partner Eli Lilly. Costa is the former head of Novartis AG's (NVS) U.S. operations.

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