- Quarterly Report (10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________________________________

FORM 10-Q

_________________________________________________________________

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-19700

_________________________________________________________________

AMYLIN PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

_________________________________________________________________



Delaware	33-0266089
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9360 Towne Centre Drive San Diego, California	92121
(Address of principal executive offices)	(Zip code)

(858) 552-2200

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

_________________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	x		Accelerated filer	o
Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class		Outstanding on July 27, 2012
Common Stock, $.001 par value		164,283,038

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AMYLIN PHARMACEUTICALS, INC.

TABLE OF CONTENTS



COVER PAGE
TABLE OF CONTENTS		3
PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements	4
	Consolidated Balance Sheets as of June 30, 2012 (unaudited) and December 31, 2011	4
	Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011 (unaudited)	5
	Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2012 and 2011 (unaudited)	6
	Consolidated Statements of Cash Flows for the three and six months ended June 30, 2012 and 2011 (unaudited)	7
	Notes to Consolidated Financial Statements (unaudited)	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	34
ITEM 4.	Controls and Procedures	34
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	36
ITEM 1A.	Risk Factors	38
ITEM 6.	Exhibits	51
SIGNATURE		53

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PART I. FINANCIAL INFORMATION


ITEM 1.	Financial Statements

AMYLIN PHARMACEUTICALS, INC.

Consolidated Balance Sheets

(in thousands, except per share data)



	June 30, 2012			December 31, 2011
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	95,237		$	99,859
Short-term investments	233,123			104,206
Restricted cash	10,673			10,519
Accounts receivable, net	54,629			45,489
Inventories, net	143,605			111,959
Other current assets	33,609			49,158
Total current assets	570,876			421,190
Property, plant and equipment, net	821,847			831,162
Intangible asset related to reacquired economic interest, net	258,281			273,842
Economic interest in exenatide products to be reacquired as a business	327,697			327,697
Other long-term assets	20,037			16,308
	$	1,998,738		$	1,870,199
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	25,599		$	21,035
Accrued compensation	47,689			66,776
Payable to former collaborative partner	6,546			28,914
Promissory note related to revenue sharing obligation, current portion	94,391			63,552
Loss protection liability	26,713			—
Other current liabilities	106,984			115,740
Total current liabilities	307,922			296,017
Deferred revenue, net of current portion	47,500			51,250
Restructuring liability, net of current portion	21,710			23,877
Convertible senior notes	510,680			496,037
Note payable, net of discount	156,140			155,064
Promissory note related to revenue sharing obligation, net of debt discount and net of current portion	956,163			924,306
Other long-term obligations, net of current portion	40,984			62,393
Commitments and contingencies	—			—
Stockholders’ deficit:
Preferred stock, $.001 par value, 7,500 shares authorized, none issued and outstanding at June 30, 2012 and December 31, 2011	—			—
Common stock, $.001 par value, 450,000 shares authorized, 163,543 and 146,289 issued and outstanding at June 30, 2012 and December 31, 2011, respectively	164			146
Additional paid-in capital	2,774,305			2,506,013
Accumulated deficit	(2,816,840		)	(2,643,579		)
Accumulated other comprehensive income (loss)	10			(1,325		)
Total stockholders’ deficit	(42,361		)	(138,745		)
	$	1,998,738		$	1,870,199

See accompanying notes to consolidated financial statements.

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AMYLIN PHARMACEUTICALS, INC.

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)



	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Revenues:
Net product sales	$	166,494		$	154,789		$	317,080		$	305,628
Revenues under collaborative agreements	2,833			3,276			5,933			5,151
Total revenues	169,327			158,065			323,013			310,779
Costs and expenses:
Cost of goods sold	35,163			11,843			69,720			24,387
Selling, general and administrative	108,542			65,217			218,890			129,842
Research and development	42,263			45,069			93,499			86,984
Collaborative profit sharing	—			60,652			—			120,503
Amortization of acquired intangible assets	7,781			—			15,561			—
Loss on fair value adjustments	200			—			4,147			—
Restructuring	5,254			126			5,405			2,984
Total costs and expenses	199,203			182,907			407,222			364,700
Operating loss	(29,876		)	(24,842		)	(84,209		)	(53,921		)
Interest and other expense, net	(44,345		)	(6,566		)	(89,052		)	(14,811		)
Net loss	$	(74,221	)	$	(31,408	)	$	(173,261	)	$	(68,732	)
Net loss per share, basic and diluted	$	(0.46	)	$	(0.22	)	$	(1.11	)	$	(0.47	)
Shares used in computing net loss per share, basic and diluted	163,110			145,849			156,600			145,321

See accompanying notes to consolidated financial statements.

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AMYLIN PHARMACEUTICALS, INC.

Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)



	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Net loss	$	(74,221	)	$	(31,408	)	$	(173,261	)	$	(68,732	)
Net unrealized gain on investments	7			158			1,335			252
Comprehensive net loss attributable to Amylin Pharmaceuticals, Inc. shareholders	$	(74,214	)	$	(31,250	)	$	(171,926	)	$	(68,480	)

See accompanying notes to consolidated financial statements.

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AMYLIN PHARMACEUTICALS, INC.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)



	Six months ended June 30,
	2012			2011
Operating activities:
Net loss	$	(173,261	)	$	(68,732	)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Depreciation and amortization	46,684			25,265
Interest expense and debt discount accretion on promissory note related to revenue sharing obligation	68,783			—
Accretion of debt discount and amortization of debt issuance costs	10,896			8,092
Employee stock-based compensation	16,365			15,868
Stock-settled compensation accruals	11,552			8,582
Restructuring	5,512			645
Deferred revenue amortization	(3,750		)	(3,750		)
Change in fair value of assets and liabilities carried at fair value	10,650			—
Other non-cash expenses	68			4,028
Changes in operating assets and liabilities:
Accounts receivable	(9,140		)	6,866
Inventories	(31,646		)	15,423
Other current assets	11,117			13,387
Accounts payable and accrued liabilities	(120		)	(671		)
Accrued compensation	(14,143		)	8,662
Payable to collaborative partner	(22,386		)	3,921
Deferred collaborative profit sharing	—			8,245
Restructuring liabilities	(6,117		)	(3,696		)
Other assets and liabilities, net	1,053			(437		)
Long-term prepaid expenses	(4,618		)	(706		)
Net cash flows provided by (used for) operating activities	(82,501		)	40,992
Investing activities:
Purchases of short-term investments	(257,841		)	(284,658		)
Sales and maturities of short-term investments	129,131			234,254
Increase of restricted cash	(154		)	—
Purchases of property, plant and equipment	(21,502		)	(25,237		)
Increase (decrease) in other long-term assets	(909		)	326
Net cash flows used for investing activities	(151,275		)	(75,315		)
Financing activities:
Issuance of common stock, net	235,241			5,399
Revenue sharing obligation payment	(6,087		)	—
Proceeds from note payable	—			165,000
Repayment of convertible senior notes	—			(200,000		)
Net cash flows provided by (used for) financing activities	229,154			(29,601		)
Change in cash and cash equivalents	(4,622		)	(63,924		)
Cash and cash equivalents at beginning of period	99,859			164,521
Cash and cash equivalents at end of period	$	95,237		$	100,597
Supplemental disclosure of cash flow information:
Property, plant and equipment additions in other current liabilities	$	—		$	105
Non-cash dispositions of property, plant and equipment	$	—		$	247
Non-cash interest capitalized to property, plant and equipment	$	5,610		$	6,230
Non-cash financing activities:
Shares contributed as employer 401(k) match	$	3,243		$	3,956
Shares contributed to employee stock ownership plan	$	13,253		$	16,456

See accompanying notes to consolidated financial statements.

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AMYLIN PHARMACEUTICALS, INC.

Notes to Consolidated Financial Statements

June 30, 2012

(unaudited)

1. Summary of Significant Accounting Policies

Basis of Presentation

The information contained herein has been prepared in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X. The information as of June 30, 2012 , and for the six months ended June 30, 2012 and 2011 , is unaudited. In the opinion of management, the information reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. All such adjustments are of a normal recurring nature. Interim results are not necessarily indicative of results for a full year. The balance sheet at December 31, 2011 has been derived from the audited consolidated financial statements at that date, but does not include all information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. For more complete financial information, these financial statements should be read in conjunction with the audited consolidated financial statements included in Amylin Pharmaceuticals, Inc.’s (referred to as we, us or Amylin) Annual Report on Form 10-K for the year ended December 31, 2011 .

Pending Acquisition

On June 29, 2012 Bristol-Myers Squibb Company, or BMS, and Amylin announced that BMS will acquire Amylin for $31.00 per share in cash, pursuant to a cash tender offer and second step merger, or an aggregate purchase price of approximately $5.3 billion . The total value of the transaction, including Amylin's net debt and a contractual payment obligation to Eli Lilly & Company, or Lilly, together totaling about $1.7 billion , is approximately $7 billion . The acquisition has been unanimously approved by the boards of directors of BMS and Amylin. The board of directors of Amylin has unanimously recommended that Amylin's stockholders tender their shares into the tender offer.

Revenue Recognition

Net Product Sales

We sell BYDUREON ^TM (exenatide extended-release for injectable suspension) and BYETTA ^TM (exenatide) injection for the treatment of type 2 diabetes and SYMLIN ^TM (pramlintide acetate) injection for the treatment of type 1 and type 2 diabetes primarily to wholesale distributors, who, in turn, sell to retail pharmacies and government entities. Product sales are recognized when delivery of the products has occurred, title has passed to the customer, the selling price is fixed or determinable, collectability is reasonably assured and we have no further obligations. We record product sales net of allowances for product returns, rebates, wholesaler chargebacks, wholesaler discounts and prescription vouchers at the time of sale and report product sales net of such allowances. We must make significant judgments in determining these allowances. If actual results differ from our estimates, we will be required to make adjustments to these allowances in the future.

We record all United States BYDUREON, BYETTA and SYMLIN product sales. With respect to BYETTA, under our former collaborative agreement with Lilly for the six months ended June 30, 2011 we determined that we were qualified as a principal based on our responsibilities under our contracts with Lilly which included manufacture of product for sale in the United States, responsibility for establishing pricing in the United States, distribution, ownership of product inventory and credit risk from customers. As further described in Note 6, as a result of our November 2011 Settlement and Termination Agreement with Lilly, the Termination Agreement, full responsibility for the commercialization of exenatide in the U.S. was transferred to Amylin effective November 30, 2011.

Revenues Under Collaborative Agreements

Revenues under collaborative agreements consist of the amortization of product and technology license fees, milestone payments earned and royalties earned. Upfront product and technology license fees under multiple-element arrangements are deferred and recognized over the period of such services or performance if such arrangements require on-going services or performance. Non-refundable amounts received for substantive milestones are recognized upon achievement of the milestone. Any amounts received prior to satisfying these revenue recognition criteria are recorded as deferred revenue. Royalty revenue is earned on annual gross margins for all exenatide products sold outside of the U.S. and is recorded based upon gross margins for such sales.

Collaborative Profit-Sharing

Collaborative profit-sharing relates to our former collaborative agreement with Lilly and represents Lilly’s 50% share of the gross margin for BYETTA sales in the United States. As further described in Note 6, as a result of the Termination Agreement, full responsibility for the commercialization of exenatide in the U.S. was transferred to Amylin effective November

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30, 2011, therefore we no longer record collaborative profit-sharing in connection with sales of exenatide products in the United States.

Accounts Receivable

Trade accounts receivable are recorded net of allowances for cash discounts for prompt payment, doubtful accounts, product returns and chargebacks. Allowances for rebate discounts and distribution fees are included in other current liabilities in the accompanying consolidated balance sheets. Estimates for allowances for doubtful accounts are determined based on existing contractual obligations, historical payment patterns and individual customer circumstances. The allowance for doubtful accounts was $0.2 million and $2.1 million at June 30, 2012 and December 31, 2011 , respectively.

Fair Value Measurements

We have certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.

The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact. The guidance prioritizes the inputs used in measuring fair value into the following hierarchy:



Level 1	Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2	Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and

Level 3	Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about considerations that market participants would use in pricing.

There have been no transfers of assets or liabilities between the fair value measurement classifications.

The following table summarizes the assets and liabilities measured at fair value on a recurring basis as of June 30, 2012 and December 31, 2011 (in thousands):

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	Fair value measurements as of
	June 30, 2012
	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	95,237	$	40,850	$	54,387	$	—
Short-term investments
Certificate of deposit	3,000		3,000		—		—
Obligations of U.S. Government-sponsored enterprises	38,608		—		38,608		—
Corporate debt securities	78,228		—		78,228		—
Commercial paper	113,287		—		113,287		—
Restricted cash	10,673		10,673		—		—
Deferred compensation plan assets	9,950		2,485		7,465		—
Embedded derivative (2)	1,188		—		—		1,188
	$	350,171	$	57,008	$	291,975	$	1,188
Liabilities:
Deferred compensation plan liabilities	$	9,950	$	2,485	$	7,465	$	—
Loss protection liability carried at fair value (3)	50,566		—		—		50,566
	$	60,516	$	2,485	$	7,465	$	50,566

	Fair value measurements as of
	December 31, 2011
	Total		Level 1 (1)		Level 2 (1)		Level 3
Assets:
Cash and cash equivalents	$	99,859	$	61,850	$	38,009	$	—
Short-term investments
Obligations of U.S. Government-sponsored enterprises	40,872		—		40,872		—
Corporate debt securities	63,334		—		63,334		—
Restricted cash	10,519		10,519		—		—
Deferred compensation plan assets	8,192		990		7,202		—
Embedded derivative (2)	7,691		—		—		7,691
	$	230,467	$	73,359	$	149,417	$	7,691
Liabilities:
Deferred compensation plan liabilities	$	8,192	$	990	$	7,202	$	—
Loss protection liability carried at fair value (3)	46,419		—		—		46,419
	$	54,611	$	990	$	7,202	$	46,419

(1) During 2012, the company changed how it categorizes amounts within the fair value hierarchy and thus, certain amounts now reported as Level 2 fair value instruments at June 30, 2012 were previously shown as Level 1 and have been reclassified.

(2) The embedded derivative is associated with the promissory note related to the Revenue Sharing Obligation, or RSO, issued in connection with the Termination Agreement (see Note 6). The embedded derivative represents embedded options which would allow Amylin to discharge all or a portion of the obligation under certain circumstances (see Note 8 for the terms of the RSO). The fair value of the embedded derivative is calculated using a probability weighted expected return method, or PWERM. Significant inputs to the valuation include the following:


•	Management's estimates of total revenue of exenatide products over the period in which the RSO is to be repaid;


•	A variety of scenarios under which management estimated the probability that BYDUREON ^TM (exenatide for extended-release injectable suspension) would be approved by the U.S. Food and Drug Administration , or the FDA, prior to June 30, 2014;


•	A variety of scenarios under which all exenatide products would be removed from certain geographic

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markets for safety or efficacy reasons and remain unsalable for four consecutive years.

(3) The loss protection liability arose in connection with the Termination Agreement (see Note 6) and relates to payments required to be made prior to the final transfer of the markets outside the United States from Lilly to Amylin. The maximum that could be paid under the loss protection liability is $60.0 million over the period January 1, 2012 through December 31, 2013. The fair value of the loss protection liability is calculated using a PWERM. Significant inputs to the valuation include the following:


•	Financial projections for markets outside the United States, or the OUS markets, which were provided to Amylin's management by Lilly;


•	A variety of scenarios under which management estimated the extent to which these financial projections would be achieved, and the resulting payouts of the amounts that could be made for the twelve months ended December 31, 2012 and 2013.

The greatest drivers of variability in this liability are the estimated losses subject to the guarantee and variations in the discount rates used in the valuation.

The following table presents a reconciliation of the assets and liabilities measured at fair value on a quarterly basis using significant unobservable inputs (Level 3) from January 1, 2012 to June 30, 2012 (in thousands):



	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012			2011
Assets:
Embedded derivative:
Beginning of period balance:	$	2,441		$	—	$	7,691		$	—
Adjustment to fair value charged to interest and other expense, net	(1,253		)	—		(6,503		)	—
End of period balance:	$	1,188		$	—	$	1,188		$	—


	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012			2011
Liabilities:
Loss protection liability carried at fair value:
Beginning of period balance:	$	50,366		$	—	$	46,419		$	—
Adjustment to fair value charged to operating expense	200			—		4,147			—
Balance at June 30, 2012	$	50,566		$	—	$	50,566		$	—

As mentioned in the notes to the fair value tables above, the RSO contains provisions whereby Amylin's obligation under the RSO could change or be discharged. These provisions represent options embedded within the RSO and are recorded as embedded derivative assets. The fair value adjustments related to the embedded derivative asset recorded during the three months ended June 30, 2012 represents the change in the fair value of the embedded option that would allow Amylin to discharge all or a portion of the RSO obligation in the event that all exenatide products were removed from certain geographic markets for safety or efficacy reasons and remain unsalable for four consecutive years. The fair value adjustment related to the embedded derivative recorded during the six months ended June 30, 2012 represents both the aforementioned adjustment for the three month period as well as a decline in the fair value of the embedded option that relates to BYDUREON approval. Specifically, in the event Amylin did not receive FDA approval of BYDUREON by June 30, 2014, the RSO could have been fully discharged. As FDA approval of BYDUREON was received on January 27, 2012, the option to discharge the RSO obligation is no longer available to us, therefore the value of the related embedded option was reduced to zero.

The fair value adjustment related to the loss protection liability arose from our quarterly assessment of the fair value of the estimated loss protection we would be likely to pay to Lilly under this obligation and the fair value adjustments recorded for both the three and six month periods ended June 30, 2012 are primarily related to changes in the discount rate based on the contractual timing of the payment.

Research and Development Expenses

Research and development costs are expensed as incurred and include salaries and bonuses, benefits, non-cash stock-

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based compensation, license fees, milestone payments due under license agreements, costs paid to third-party contractors to perform research, conduct clinical trials and develop drug materials and delivery devices and associated overhead expenses and facilities costs. Reimbursed research and development costs under collaborative arrangements are recorded as a reduction to research and development expenses and are recognized in the period in which the related costs are incurred. Clinical trial costs, including costs associated with third-party contractors, are a significant component of research and development expenses. Invoicing from third-party contractors for services performed can lag several months. We accrue the costs of services rendered in connection with such activities based on our estimate of management fees, site management and monitoring costs and data management costs. Actual clinical trial costs may differ from estimates and are adjusted in the period in which they become known.

Per Share Data

Basic and diluted net loss applicable to common stock per share is computed using the weighted average number of common shares outstanding during the period. Shares used in calculating basic and diluted net loss per common share exclude the following common share equivalents (in thousands):



	Three months ended June 30,		Six months ended June 30,
	2012	2011	2012	2011
Antidilutive options and awards to purchase common stock	3,636	441	2,649	491
Antidilutive shares underlying convertible senior notes	9,416	10,375	9,416	12,793
	13,052	10,816	12,065	13,284

In future periods, if we report net income and the common share equivalents for our convertible senior notes are dilutive, the common stock equivalents will be included in the weighted average shares computation and interest expense related to the notes will be added back to net income to calculate diluted earnings per share.

Accounting for Stock-Based Compensation

We utilize the fair value method of accounting for stock-based compensation arrangements. Accordingly, we expense the estimated fair value of non-cash stock-based awards granted to our employees over the requisite employee service period, which is generally the vesting period. Total employee non-cash stock-based compensation expense by operating statement classification was as follows (in thousands):



	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
Selling, general and administrative expenses	$	5,194	$	5,240	$	11,496	$	10,779
Research and development expenses	2,013		2,712		4,869		5,089
	$	7,207	$	7,952	$	16,365	$	15,868

Non-cash stock-based compensation expense during the six month periods ended June 30, 2012 and 2011 related to stock-based awards consisting of stock options, time and performance based restricted stock units and employee stock purchase rights. At June 30, 2012 , total unrecognized estimated compensation cost related to non-vested stock-based awards granted prior to that date was $50.2 million , which is expected to be recognized over a weighted-average period of 2.4 years. We issued 1.6 million shares upon the exercise of stock options in the six months ended June 30, 2012 .

In addition to the stock-based compensation discussed above, we also recorded expense associated with our Employee Stock Ownership Plan, or ESOP, and our 401(k) plan. The breakdown of non-cash ESOP and 401(k) expense by operating statement classification for each of the six month periods ended June 30, 2012 and 2011 is presented below (in thousands):



	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
Selling, general and administrative expenses	$	2,452	$	2,528	$	6,835	$	5,064
Research and development expenses	1,403		1,816		4,717		3,518
	$	3,855	$	4,344	$	11,552	$	8,582

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Consolidation

The consolidated financial statements include our accounts and those of our wholly owned subsidiaries, Amylin Ohio, LLC, and Amylin Investments, LLC. All significant intercompany transactions and balances have been eliminated in consolidation.

Recently Issued Accounting Pronouncements

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income ” (ASU 2011-05). This newly issued accounting standard (1) eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity; (2) requires the consecutive presentation of the statement of net income and other comprehensive income; and (3) requires an entity to present reclassification adjustments on the face of the financial statements from other comprehensive income to net income. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income nor do the amendments affect how earnings per share is calculated or presented. In December 2011, the FASB issued ASU No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 , which defers the requirement within ASU 2011-05 to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. During the deferral, entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect prior to the issuance of ASU 2011-05. We adopted both ASUs effective January 1, 2012. The adoption of this new guidance did not have a material impact on our financial statements.

In May 2011, the FASB issued ASU No. 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements". The guidance limits the highest-and-best-use measure to nonfinancial assets, permits certain financial assets and liabilities with offsetting positions in market or counterparty credit risks to be measured at a net basis, and provides guidance on the applicability of premiums and discounts. Additionally, the guidance expands the disclosures on Level 3 inputs by requiring quantitative disclosure of the unobservable inputs and assumptions, as well as description of the valuation processes and the sensitivity of the fair value to changes in unobservable inputs. We adopted this ASU effective January 1, 2012. The adoption of this new guidance did not have a material impact on our financial statements.

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2. Short-term Investments

Our short-term investments, consisting principally of debt securities, are classified as available-for-sale and are stated at fair value based upon significant other observable inputs (Level 2 in the fair value hierarchy). Unrealized holding gains or losses on these securities are included in other comprehensive loss. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. For investments in mortgage-backed securities, amortization of premiums and accretion of discounts are recognized in interest income using the interest method, adjusted for anticipated prepayments as applicable. Estimates of expected cash flows are updated periodically and changes are recognized in the calculated effective yield prospectively as appropriate. Such amortization is included in interest income. Realized gains and losses are included in interest income and declines in value judged to be other-than-temporary on available-for-sale securities are included in impairment loss on investments, a component of other expense. In assessing potential impairment of our short-term investments, we evaluate the impact of interest rates, potential prepayments on mortgage-backed securities, changes in credit quality, the length of time and extent to which the market value has been less than cost, and our intent and ability not to sell the security in order to allow for an anticipated recovery in fair value. The cost of securities sold is based on the specific-identification method.

The following is a summary of short-term investments as of June 30, 2012 and December 31, 2011 (in thousands):



	Available-for-Sale Securities
	Amortized Cost		Gross Unrealized Gains (1)		Gross Unrealized Losses (1)			Estimated Fair Value
June 30, 2012
Certificate of deposit	$	3,000	$	—	$	—		$	3,000
Obligations of U.S. Government-sponsored enterprises	38,614		10		(16		)	38,608
Corporate debt securities	77,195		1,086		(53		)	78,228
Commercial paper	113,281		6		—			113,287
Total	$	232,090	$	1,102	$	(69	)	$	233,123
December 31, 2011
Obligations of U.S. Government-sponsored enterprises	$	40,914	$	3	$	(45	)	$	40,872
Corporate debt securities	62,466		890		(22		)	63,334
Total	$	103,380	$	893	$	(67	)	$	104,206

(1) The unrealized gains on investments in available-for-sale securities, net of tax effects were $0.6 million and $0.5 million at June 30, 2012 and December 31, 2011 , respectively. Additionally, other comprehensive loss included unrealized losses, net of tax effects of $0.6 million and $1.8 million , on investments underlying our 2001 Non-Qualified Deferred Compensation Plan at June 30, 2012 and December 31, 2011 , respectively.

Contractual maturities of short-term investments at June 30, 2012 were as follows (in thousands):



	Fair Value
Due within 1 year	$	173,582
After 1 but within 5 years	55,978
After 5 but within 10 years	—
After 10 years	3,563
Total	$	233,123

For purposes of these maturity classifications, the final maturity date is used for securities not due at a single maturity date. Securities not due at a single maturity date include mortgage-backed securities, which are included in Obligations of U.S Government-sponsored enterprises in the table above.

The following table shows the gross unrealized losses and fair value of our investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2012 (in thousands):

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	Less than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Obligations of U.S Government-sponsored enterprises	$	20,440	$	(11	)	$	1,649	$	(5	)	$	22,089	$	(16	)
Corporate debt securities	65,052		(53		)	—		—			65,052		(53		)
	$	85,492	$	(64	)	$	1,649	$	(5	)	$	87,141	$	(69	)

Our investments had gross unrealized losses of $0.1 million for both June 30, 2012 and December 31, 2011 . The unrealized losses on our investments in marketable securities are due in most instances to the increased volatility in the markets impacting the classes of securities we invest in and not deterioration in credit ratings. Our investments generally have a short effective duration, and since we have the ability and intent not to sell these investments until a recovery of fair value, which may be maturity, we do not consider these investments to be other-than-temporarily impaired at June 30, 2012 .

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3. Inventories, net

Inventories are stated at the lower of cost or market (net realizable value) and net of a valuation allowance for potential excess or obsolete material of $0.6 million at June 30, 2012 . There was no valuation allowance as of December 31, 2011 . Cost is determined by the first-in, first-out method.

Raw materials consist of bulk drug material for BYDUREON, BYETTA and SYMLIN. Work-in-process inventories consist of in-process vials for BYDUREON, in-process BYETTA cartridges and in-process SYMLIN cartridges. Finished goods inventories consist of BYDUREON, BYETTA and SYMLIN drug product in disposable delivery systems.

We expense costs relating to the purchase and production of pre-approval inventories as research and development expense in the period incurred until such time as we believe future commercialization is probable and future economic benefit is expected to be realized.

Inventories, net consist of the following (in thousands):



	June 30, 2012		December 31, 2011
Raw materials	$	92,640	$	74,793
Work-in-process	39,591		30,155
Finished goods	11,374		7,011
	$	143,605	$	111,959

4. Other Current Assets

Other current assets consist of the following (in thousands):



	June 30, 2012		December 31, 2011
Prepaid expenses	$	17,077	$	24,669
Interest and other receivables	6,582		16,297
Other current assets	9,950		8,192
	$	33,609	$	49,158

5. Other Current Liabilities

Other current liabilities consist of the following (in thousands):



	June 30, 2012		December 31, 2011
Accrued rebates	$	42,432	$	45,862
Accrued expenses	41,480		43,684
Restructuring liability, current portion	4,455		8,405
Deferred revenue, current portion	7,500		7,500
Other current liabilities	11,117		10,289
	$	106,984	$	115,740

6. Collaborative Agreements

We have entered into various collaborative agreements which provide us with rights to develop, produce and market products using certain know-how, technology and patent rights maintained by our collaborative partners. Terms of the various collaboration agreements may require us to make and/or receive milestone payments upon the achievement of certain product research and development objectives and pay and/or receive royalties on future sales, if any, of commercial products resulting from the collaboration.

Amounts due from our collaborative partners related to development activities are generally reflected as a reduction of research and development expenses and amounts due to our collaborative partners related to sharing of commercialization expenses are generally reflected as selling, general and administrative expenses. Milestone payments and up-front payments

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received are generally reflected as collaborative revenue as discussed above in Note 1, and milestone payments and up-front payments made are generally recorded as research and development expenses if the payments relate to drug candidates that have not yet received regulatory approval. Milestone payments and up-front payments that we make related to approved drugs will generally be capitalized and amortized to cost of goods sold over the economic life of the product. Royalties received are generally reflected as collaborative revenues and royalties paid are generally reflected as cost of goods sold.

For collaborations with commercialized products, if we are the principal we record revenue and the corresponding operating costs in their respective line items within our statement of operations based on the nature of the shared expenses. If we are not the principal (which is the case for our sales of exenatide products to Lilly for sale outside the United States), we record operating costs as a reduction of revenue. The principal is the party who is responsible for delivering the product or service to the customer, has latitude with establishing price and has the risks and rewards of providing product or service to the customer, including inventory and credit risk.

Collaboration with Eli Lilly and Company

In September 2002, we and Lilly entered into a Collaboration Agreement for the global development and commercialization of exenatide, or the Lilly Agreement. On November 7, 2011 we and Lilly entered into a Settlement and Termination Agreement, or the Termination Agreement, to terminate our collaboration for exenatide and resolve the outstanding litigation between the companies. As part of the agreement, the parties agreed to transition full responsibility for the worldwide development and commercialization of exenatide to Amylin, starting in the U.S. on November 30, 2011, progressing to all markets by the end of 2013. Under the agreement, the companies completed the U.S. Transition on November 30, 2011, or the U.S. Transition Date, and the OUS Transition will occur no later than December 31, 2013. In the event the OUS transition does not occur by December 31, 2013, the agreement contains various provisions with respect to future rights and obligations of each party that extend beyond December 31, 2013.

The Lilly Agreement included BYETTA, our twice-daily formulation of exenatide for the treatment of type 2 diabetes, and any sustained release formulations of exenatide such as BYDUREON, our once-weekly formulation of exenatide for the treatment of type 2 diabetes, which received FDA approval on January 27, 2012. Under the terms of the Lilly Agreement, operating profits from products sold in the United States were shared equally between us and Lilly through November 30, 2011, which is the date Lilly’s involvement in the United States commercial operations ceased. Lilly was responsible for 53% of shared exenatide global development and commercialization expenses that generate utility both in the United States and outside the United States through the U.S. Transition Date; we were responsible for 47% of these expenses. Lilly is responsible for 100% of all exenatide development and commercialization expenses that generate utility predominantly outside of the U.S. until the OUS Transition is complete. The Lilly Agreement provided for tiered royalties payable to us by Lilly based upon the annual gross margin for all OUS exenatide product sales and the Termination Agreement also provides for the payment of such royalties through the date the OUS Transition is complete. Royalty payments for OUS exenatide product sales commenced during the second quarter of 2011 upon the achievement of a one-time cumulative gross margin threshold.

In October 2008, we and Lilly entered into an Exenatide Once Weekly Supply Agreement, or the Supply Agreement, pursuant to which we agreed to supply commercial quantities of BYDUREON for sale in the United States and outside the United States. In connection with the Termination Agreement, the Supply Agreement was amended and restated effective November 7, 2011, or the Amended and Restated Supply Agreement, pursuant to which Lilly will pay Amylin a fixed price for product supplied under the agreement. Under the terms of the Amended and Restated Supply Agreement, we are required to manufacture BYDUREON intended for commercial sale by Lilly in jurisdictions outside the United States through the OUS Transition period.

The following is a summary of activity related to our collaboration with Lilly and the location in the consolidated statements of operations (in thousands):

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	Classification within Consolidated Statements of Operations	Three Months Ended				Six Months Ended
Activity	Classification within Consolidated Statements of Operations	June 30, 2012		June 30, 2011		June 30, 2012		June 30, 2011
Royalty revenue	Revenues under collaborative agreements	$	957	$	1,401	$	2,083	$	1,401
Gross margin sharing	Collaborative profit sharing	$	—	$	60,652	$	—	$	120,503
Development expense cost-sharing payments received from Lilly for BYETTA and BYDUREON development expense	Reduction of research and development expense	$	—	$	17,842	$	—	$	35,188
Cost-sharing payments due from Lilly for shared sales force expenses, marketing expenses and other commercial or operational support	Reduction of selling, general and administrative expense	$	—	$	2,300	$	—	$	5,637

Collaboration with Alkermes, Inc.

In May 2000 we entered into a development and license agreement with Alkermes Controlled Therapeutics, Inc. II, or Alkermes, a subsidiary of Alkermes, Inc., a company specializing in the development of products based on proprietary drug delivery technologies. The development and license agreement, or the Alkermes Agreement, was amended in 2005 and provides for Alkermes to assist us in the development, manufacture and commercialization of BYDUREON. Under the terms of the Alkermes Agreement, Alkermes has transferred to us its technology for manufacturing BYDUREON. We are responsible for manufacturing BYDUREON for commercial sale. In exchange, Alkermes is entitled to receive funding for research and development. During the six months ended June 30, 2012 we paid Alkermes a $7.0 million milestone upon the commercial launch of BYDUREON in the United States. Alkermes is also entitled to receive royalties on any product sales. In addition to the collaboration agreement, Alkermes is supplying us with the polymer materials required for the commercial manufacture of BYDUREON under a Supply Agreement dated December 29, 2007.

Collaboration with Takeda Pharmaceutical Company, Ltd.

On October 30, 2009, we and Takeda Pharmaceutical Company Limited, or Takeda, entered into a License, Development and Commercialization Agreement, or the Takeda Agreement, pursuant to which the companies will co-develop and commercialize pharmaceutical products containing compounds specified in the Takeda Agreement for the treatment of human indications including, but not limited to, (i) weight management and/or obesity, (ii) glycemic control and (iii) cardiovascular disease. We received a one-time, nonrefundable cash payment of $75 million from Takeda in connection with the execution of the Takeda Agreement. We recorded the up-front payment as deferred revenue in our consolidated balance sheets and will recognize the revenue over the estimated development period of ten years. As of June 30, 2012 deferred revenue associated with the Takeda collaboration equaled $55.0 million , of which $47.5 million is classified as long-term.

The following is a summary of activity related to the Takeda Agreement and the location in the consolidated statements of operations (in thousands):



	Classification within Consolidated Statements of Operations	Three Months Ended				Six Months Ended
Activity		June 30, 2012		June 30, 2011		June 30, 2012		June 30, 2011
Amortization of up-front payments	Revenues under collaborative agreements	$	1,875	$	1,875	$	3,750	$	3,750
Cost-sharing payments due from Takeda for shared development expenses	Reduction of research and development expense	$	571	$	1,971	$	1,329	$	6,989

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7. Restructuring

During the six months ended June 30, 2012 we recorded restructuring charges of $5.4 million consisting primarily of asset impairments. During the six months ended June 30, 2011 we recorded restructuring charges of $3.0 million consisting primarily of employee separation costs and asset impairment charges. The following table summarizes the components of the restructuring charges for the three and six months ended June 30, 2012 (in thousands):



	Three months ended June 30, 2012								Six months ended June 30, 2012
	Accruals			Non-cash items		Total			Accruals			Non-cash		Total
Employee separation costs	$	1		$	—	$	1		$	1		$	—	$	1
Asset impairments	(218		)	5,512		5,294			(218		)	5,512		5,294
Facilities related expenses	(74		)	—		(74		)	(74		)	—		(74		)
Other restructuring charges	33			—		33			184			—		184
	$	(258	)	$	5,512	$	5,254		$	(107	)	$	5,512	$	5,405

The following table sets forth activity in the restructuring liability for recent restructuring activities for the six months ended June 30, 2012 , which is comprised of employee separation costs and facilities-related charges (in thousands):



	Employee separation costs			Facilities related charges			Other restructuring charges			Total
Balance at December 31, 2011	$	2,145		$	30,137		$	—		$	32,282
Accruals	—			77			(184		)	(107		)
Payments	(2,145		)	(5,478		)	184			(7,439		)
Accretion of sub-lease expense	—			1,429			—			1,429
Balance at June 30, 2012	$	—		$	26,165		$	—		$	26,165

We are continuing to assess our facility requirements for our San Diego campus as a result of this and our prior restructurings and could record additional facilities-related charges over the next several quarters.

8. Indebtedness

Our indebtedness is summarized as follows (in thousands):



	June 30, 2012		December 31, 2011
Current portion:
Promissory note related to revenue sharing obligation	$	94,391	$	63,552
Current portion of indebtedness	$	94,391	$	63,552
Non-current portion:
Convertible senior notes, net of debt discount	$	510,680	$	496,037
Notes payable, net of debt discount	156,140		155,064
Promissory note related to revenue sharing obligation, net of debt discount and net of current portion	956,163		924,306
Non-current portion of indebtedness	$	1,622,983	$	1,575,407

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The following is a summary description of our indebtedness as of June 30, 2012 :

Promissory Note Related to Revenue Sharing Obligation

On November 7, 2011 we entered into a secured promissory note with Lilly, the RSO, under which we agreed to pay to Lilly a principal sum of $1.2 billion , plus interest. Repayments on the Secured Promissory Note are determined based upon the quarterly net sales of exenatide products. The RSO has a scheduled maturity of December 31, 2036 , however we may prepay all or any portion of the balance without penalty.

The following table summarizes the principal amount of the liability component (including accrued interest), the unamortized discount and net carrying amount of the RSO as of June 30, 2012 and December 31, 2011 (in thousands):



	June 30, 2012			December 31, 2011
Promissory note related to revenue sharing obligation —Due December 31, 2036
Principal amount, including accrued interest	$	1,258,875		$	1,209,109
Unamortized debt discount	(208,321		)	(221,251		)
Net carrying amount	1,050,554			987,858
Less current portion	(94,391		)	(63,552		)
Non-current portion	$	956,163		$	924,306

The significant terms of the RSO are discussed below.

Interest accruals. Interest on the RSO accrues and compounds in an amount equal to 2.295% of the total RSO balance outstanding on the last day of the calendar quarter (with an annual effective rate of 9.5% ). Interest is not payable in cash when it accrues, but is instead added to the then outstanding principal amount of the RSO on the last day of each quarter.

Debt discount amortization. The debt discount is being amortized to interest expense over the expected term of the RSO at an effective interest rate of 14.4% for the six months ended June 30, 2012 .

Calculation of payment amounts. Amylin is required to make quarterly payments on the RSO in an amount equal to 15% of net sales for exenatide products for the immediate preceding calendar quarter. For the period commencing with December 1, 2011 through and including December 31, 2013 , Amylin is obligated to make payments on the RSO equal to the greater of (i) 15% of net sales for exenatide products in the United States and, if control of an OUS jurisdiction has transitioned to Amylin from Lilly, net sales for exenatide products in those OUS jurisdictions, for the immediately preceding calendar quarter or (ii) 15% of 80% of a product revenue forecast that was mutually agreed upon by both Amylin and Lilly. In the event Amylin receives upfront or milestone payments from a third party in connection with an agreement with respect to exenatide products, Amylin is obligated to make payments on the RSO equal to 20% of such upfront or milestone payments. The minimum annual RSO payment Amylin could be required to make for the years ended December 31, 2012 and 2013 is $61.3 million and $86.5 million , respectively.

Provisions related to repayment. The repayment terms for the RSO contain provisions whereby the obligation under the RSO could change under certain circumstances. The RSO could be fully discharged in the event (i) BYDUREON is not approved by June 30, 2014 and (ii) in the event all exenatide products are removed from the US, all of Europe or both for safety or efficacy reasons and continuing for a period of four years. These options were accounted for as embedded derivatives. The FDA approved BYDUREON on January 27, 2012 therefore the provision related to BYDUREON approval has expired. The provision related to removal of exenatide products from the market for safety or efficacy reasons is considered to have a very low likelihood of occurrence. See the Fair Value Measurements discussion in Note 1, regarding the considerations associated with valuing these embedded derivatives as of June 30, 2012 .

Security Agreement and Events of Default. Amylin, Amylin Ohio LLC and Lilly entered into a Security Agreement pursuant to which Amylin and Amylin Ohio LLC granted to Lilly, as collateral to secure the RSO, a security interest in intellectual property relating to the exenatide products, U. S. regulatory approvals relating to the exenatide products, certain third party license agreements, certain deposit accounts into which counterparties of such license agreements are required to make payments, certain third party supply agreements, inventory and a supply agreement for BYDUREON entered into between Amylin’s wholly-owned subsidiary Amylin Ohio LLC and Amylin, collectively referred to as the Collateral. On November 7, 2011, Amylin Ohio LLC and Lilly entered into a Subsidiary Guarantee Agreement, or the Guarantee, pursuant to

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which Amylin Ohio LLC provided a guarantee of the Secured Obligations to Lilly. Any Amylin affiliate that owns Collateral is required to become a grantor under the Security Agreement and guarantee the RSO.

Under the terms of the promissory note an event of default would occur if Amylin fails to make RSO payments in accordance with the terms of the Termination Agreement, upon the occurrence of a bankruptcy or insolvency of Amylin or any of its affiliates party to the Security Agreement or providing a guarantee, if certain representations and warranties of Amylin and Amylin Ohio LLC are not true and correct in any material respects when made, or if Amylin breaches certain assignment provisions in the Termination Agreement, Note Agreement or Security Agreement. Upon the occurrence and continuance of an event of default under the Note, Lilly may declare all outstanding amounts under the Note due and payable and may exercise its rights with respect to the Collateral under the Security Agreement. The sole recourse in respect of the Secured Obligations under the Note, the Security Agreement and the Guarantee is limited to the Collateral. These features are not significant to the accounting for this instrument.

Convertible Senior Notes

The following table summarizes the principal amount of the liability component, the unamortized discount and the net carrying amount of our convertible senior notes (in thousands):



	June 30, 2012			December 31, 2011
2007 Notes —Due June 15, 2014
Principal amount	$	575,000		$	575,000
Unamortized debt discount	(64,320		)	(78,963		)
Net carrying amount	510,680			496,037
Total convertible senior notes, net	510,680			496,037
Less current portion	—			—
Non-current portion	$	510,680		$	496,037

In June 2007, we issued notes with an aggregate principal amount of $575 million in a private placement, and that are due June 15, 2014 , referred to as the 2007 Notes. The 2007 Notes are senior unsecured obligations and rank equally with all other existing and future senior unsecured debt. The 2007 Notes bear interest at 3.0% per year, payable in cash semi-annually, and are initially convertible into a total of up to 9.4 million shares of common stock at a conversion price of $61.07 per share, subject to the customary adjustment for stock dividends and other dilutive transactions. We may not redeem the 2007 Notes prior to maturity. In addition, if a “fundamental change” (as defined in the associated indenture agreement) occurs prior to the maturity date, we will in some cases increase the conversion rate for a holder of notes that elects to convert its notes in connection with such fundamental change. The maximum conversion rate is 22.93 ( $43.62 per share), which would result in a maximum issuance of 13.2 million shares of common stock if all holders converted at the maximum conversion rate. The principal amount of the 2007 Notes exceeds the current if-converted value.

The 2007 Notes will be convertible into shares of our common stock unless we elect net-share settlement. If we elect net-share settlement, we will satisfy the accreted value of the obligation in cash and will satisfy the excess of conversion value over the accreted value in shares of our common stock based on a daily conversion value, determined in accordance with the associated indenture agreement, calculated on a proportionate basis for each day of the relevant 20 -day observation period. Holders may convert the 2007 Notes only in the following circumstances and to the following extent: (1) during the five business-day period after any five consecutive trading day period (the measurement period) in which the trading price per note for each day of such measurement period was less than 97% of the product of the last reported sale price of our common stock and the conversion rate on each such day; (2) during any calendar quarter after the calendar quarter ending March 31, 2007, if the last reported sale price of our common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 130% of the applicable conversion price in effect on the last trading day of the immediately preceding calendar quarter; (3) upon the occurrence of specified events; and (4) the 2007 Notes will be convertible at any time on or after April 15, 2014 through the scheduled trading day immediately preceding the maturity date.

Subject to certain exceptions, if we undergo a “designated event” (as defined in the associated indenture agreement) including a “fundamental change,” such as if a majority of our Board of Directors ceases to be composed of the existing directors or other individuals approved by a majority of the existing directors, holders of the 2007 Notes will, for the duration of the notes, have the option to require us to repurchase all or any portion of their 2007 Notes. The designated event repurchase price will be 100% of the principal amount of the 2007 Notes to be purchased plus any accrued interest up to but excluding the

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relevant repurchase date. We will pay cash for all notes so repurchased. The 2007 Notes have been registered under the Securities Act of 1933, as amended, to permit registered resale of the 2007 Notes and of the common stock issuable upon conversion of the 2007 Notes. The 2007 Notes pay interest in cash, semi-annually in arrears on June 15 and December 15 of each year, which began on December 15, 2007.

The fair value of the 2007 Notes, determined by observed market prices within the Level 2 hierarchy, was $585.4 and $514.3 million at June 30, 2012 and December 31, 2011 , respectively. Since we have the option to elect net-share settlement upon conversion of the 2007 Notes, we account for the 2007 Notes in accordance with the authoritative guidance for accounting for convertible debt instruments that may be settled in cash upon conversion. The carrying amount of the equity component of the 2007 Notes was $180.3 million at June 30, 2012 and December 31, 2011 . The net book value of debt issuance costs as of June 30, 2012 and December 31, 2011 was $3.1 million and $3.9 million , respectively. The debt discount and issuance costs are being amortized to interest expense over the term of the 2007 Notes, approximately two years of which remain as of June 30, 2012 . The effective interest rate on the net carrying value of the 2007 Notes was 9.3% in the six months ended June 30, 2012 and 2011 .

Note Payable

In October 2008, we and Lilly entered into a loan agreement pursuant to which Lilly made available to us a $165 million unsecured line of credit. In May 2011 we drew $165 million from this facility, referred to as the Note Payable to Lilly. The interest rate on the Note Payable to Lilly is fixed at 5.51% and is due and payable quarterly in arrears on the first business day of each quarter and the initial maturity date was May 23, 2014 . The balance of the note becomes due and payable upon a change in control. In connection with the Termination Agreement, the Note Payable to Lilly was amended and restated effective November 7, 2011 (“the Amended Note Payable to Lilly”). Under the terms of the Amended Note Payable to Lilly, the maturity date was extended to June 30, 2016 ; the interest rate on the Amended Lilly Loan remains fixed at 5.51% and interest continues to be due and payable quarterly in arrears on the first business day of each quarter. The Lilly Loan becomes due and payable immediately upon a change in control of Amylin. A portion of the consideration paid in connection with the Settlement and Termination Agreement represents the value Amylin received in connection with the extension of the maturity date of the Lilly Loan at a below market interest rate. The value representing the fee paid to extend the note at a below market interest rate was recorded as a discount on the Lilly Loan and is being accreted to interest expense over the remaining life of the loan. The unamortized balance of the discount on the Lilly Loan was $8.9 million and $9.9 million as of June 30, 2012 and December 31, 2011 , respectively.

9. Stockholders’ Equity

In March 2012, we completed an underwritten public offering of 13.5 million shares of common stock, resulting in net proceeds to Amylin of $206.9 million .

In March 2012, we contributed approximately 0.8 million newly issued shares of our common stock, valued at $16.02 per share , to our ESOP for amounts earned by participants during the year ended December 31, 2011 .

In February 2012, we contributed approximately 0.2 million newly issued shares of our common stock, valued at $15.53 per share , to our 401(k) plan for amounts earned by participants during the year ended December 31, 2011 .

10. Commitments and Contingencies

We have committed to make potential future milestone payments to third parties as part of in-licensing and development programs primarily related to research and development agreements. Potential future payments generally become due and payable only upon the achievement of certain developmental, regulatory and/or commercial milestones, such as achievement of regulatory approval, successful development and commercialization of products, and subsequent product sales. Because the achievement of these milestones is neither probable nor reasonably estimable, we have not recorded a liability on the balance sheet for any such contingencies.

As of June 30, 2012 , if all such milestones are successfully achieved, the potential future milestone and other contingency payments we could be required to make under certain contractual agreements are approximately $235.4 million in aggregate, of which $5.3 million are expected to be paid within the next 12 months.

We have committed to make future minimum payments to third parties for certain inventories in the normal course of business. The minimum purchase commitments total approximately $191.4 million as of June 30, 2012 .

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As of June 30, 2012 , commitments associated with capital investments on the BYDUREON pen device are $3.4 million .

In December 2011, we entered into an Amended and Restated Letter of Credit and Cash Collateral Agreement with Bank of America which provides for the issuance of letters of credit under which we agreed to deliver cash collateral to Bank of America, the total of which equaled $10.7 million as of June 30, 2012 . Additionally, as of June 30, 2012 we had issued $10.5 million of standby letters of credit, primarily in connection with office leases.

11. Interest and other expense, net

For the six months ended June 30, 2012 and 2011 , interest and other expense, net is comprised of the following (in thousands):



	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Total interest expense and debt discount amortization:
RSO	$	35,158		$	—		$	68,783		$	—
Convertible Debt	12,112			11,707			24,056			24,493
Note payable and other	2,848			999			5,699			1,022
	50,118			12,706			98,538			25,515
Less capitalized interest expense	(6,969		)	(5,770		)	(14,138		)	(10,214		)
Interest expense net of capitalized interest	43,149			6,936			84,400			15,301
Other expense	1,940			9			5,843			192
Total interest and other expense, net	45,089			6,945			90,243			15,493
Interest and other income	(744		)	(379		)	(1,191		)	(682		)
Total interest and other income and expense, net	$	44,345		$	6,566		$	89,052		$	14,811

The following table summarizes the interest expense we capitalized associated with construction in progress for the six months ended June 30, 2012 and 2011 (in thousands):



	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
Coupon interest expense	$	4,210	$	2,188	$	8,528	$	3,984
Non-cash interest from debt discount	2,759		3,582		5,610		6,230
Total capitalized interest	$	6,969	$	5,770	$	14,138	$	10,214

12. Litigation

From time to time in the ordinary course of business, we become involved in various lawsuits, claims and proceedings relating to the conduct of our business, including those pertaining to product liability, patent infringement and employment claims.

Product Liability Litigation

As of June 30, 2012 , we and Lilly were involved in approximately 96 separate product liability cases involving approximately 536 plaintiffs in various courts in the United States. Approximately 72 plaintiffs who previously filed cases have subsequently dismissed their cases or claims without prejudice. Certain of these cases have been brought by individuals who allege they have used BYETTA. They generally seek compensatory and punitive damages for alleged injuries, consisting primarily of pancreatitis and, in some cases, alleged wrongful death. Most of the cases are pending in California state court, where the Judicial Council has granted our petition for a “coordinated proceeding” for all California state court cases alleging harm allegedly as a result of BYETTA use. We also have received notice from plaintiff's counsel of additional claims by individuals who have not filed suit. While we cannot reasonably predict the outcome of any lawsuit, claim or proceeding, we and Lilly intend to vigorously defend these matters. However, if we are unsuccessful in our defense, these matters could result in a material adverse impact to our financial position and results of operations.

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Icahn Litigation

On April 12, 2012, an action titled Icahn Partners LP v. Amylin Pharmaceuticals, Inc ., Case No. 7418, was filed in the Court of Chancery of the State of Delaware. The complaint asserts claims arising out of the Company's response to the plaintiff's demand to inspect certain books and records of the Company purportedly pursuant to Section 220 of the Delaware General Corporation Law. The complaint seeks an order from the court compelling the Company to provide certain books and records to the plaintiff for purposes of inspection and copying. On April 30, 2012, the Court of Chancery scheduled trial in this action to be held on June 26, 2012 and on June 7, 2012, at Icahn Partners LP's request, the parties entered into a stipulation to postpone the action and to adjourn further discovery, pre-trial proceedings and the scheduled trial indefinitely, which stipulation was approved and entered by the Court of Chancery on June 7, 2012.

Stockholder Litigation

On April 4, 2012, a putative Amylin stockholder filed a derivative and putative class action titled Duane Howell v. Paulo F. Costa et al. , Case No. 37-2012-00095130, in the Superior Court of the State of California for the County of San Diego (“San Diego Class Action”) against the Company and the Company's Board of Directors (the “Board”). The complaint alleges that the Board breached its fiduciary duties in connection with its response to an offer to acquire the Company. The complaint seeks, among other things, a declaration that the Board breached its fiduciary duties, the establishment of a committee of independent directors or third party to evaluate strategic alternatives and potential offers for the Company, a prohibition of the directors from entering into certain contractual provisions that could harm the Company or its stockholders and an invalidation of the Company's shareholder rights plan. On May 1, 2012, the parties entered into a joint stipulation staying the San Diego Class Action indefinitely.

On June 26, 2012, a putative Amylin stockholder filed a derivative action titled Berger v. Bradbury, et al. , 1:12-cv-00824 in the United States District Court for the District of Delaware on behalf of and against the Company as nominal defendant and against the Board. The complaint alleges that the Board breached its fiduciary duties in connection with its response to an offer to acquire the Company. The complaint seeks, among other things, a declaration that the Board breached its fiduciary duties, the establishment of a committee of independent directors or third party to evaluate strategic alternatives and potential offers for the Company, a prohibition of the directors from entering into certain contractual provisions that could harm the Company or its stockholders, an invalidation of the Company's shareholder rights plan, and money damages.

Class Action Litigation

Putative stockholder class action complaints have been filed in the Court of Chancery of the State of Delaware (defined below as the "Consolidated Delaware Action"), the Superior Court of the State of California, County of San Diego and the United States District Court of the Southern District of California (the "California Federal Actions"). The complaints name as defendants the Company, certain officers and directors of the Board (the “Individual Defendants”), Bristol-Myers Squibb and Merger Sub. The complaints generally assert a breach of fiduciary duty against the Individual Defendants and aiding and abetting a breach of fiduciary duty against Bristol-Myers Squibb and Merger Sub. On July 27, 2012, the parties in the Consolidated Delaware Action executed a Memorandum of Understanding (the "MOU") that provided for the settlement of all claims in exchange for supplemental disclosures. That same day, those supplemental disclosures were filed with the SEC as Amendment No. 4 to the Company's Schedule 14D-9 (the "Supplemental Disclosures"). After reviewing the Supplemental Disclosures, the plaintiffs in the California Federal Actions withdrew their pending joint motion for preliminary injunction and expedited discovery. Plaintiffs generally seek an injunction prohibiting consummation of the proposed transaction, rescission and rescissory damages (to the extent the proposed transaction has already been consummated), and fees and costs associated with prosecuting the action. While we cannot reasonably predict the outcome of any lawsuit, claim or proceeding, we intend to vigorously defend these matters. However, if we are unsuccessful in our defense, these matters could result in a material adverse impact to our financial position and results of operations.

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ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Except for the historical information herein, the discussion in this quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. These statements include projections about our accounting and finances, plans and objectives for the future, future operating and economic performance and other statements regarding future performance. These statements are not guarantees of future performance or events. Our actual results may differ materially from those discussed here. Factors that could cause or contribute to differences in our actual results include those discussed under the caption “Cautionary Factors That May Affect Future Results,” as well as those discussed elsewhere in this quarterly report on Form 10-Q or in our other public disclosures. You should consider carefully those cautionary factors, together with all of the other information included in this quarterly report on Form 10-Q. Each of the cautionary factors, either alone or taken together, could adversely affect our business, operating results and financial condition, as well as adversely affect the value of an investment in our common stock. There may be additional risks that we are not presently aware of or that we currently believe are immaterial which could also impair our business and financial position. We disclaim any obligation to update any forward-looking statements.

Overview

We are a biopharmaceutical company committed to improving the lives of people with diabetes and other metabolic diseases through the discovery, development and commercialization of innovative medicines. We are marketing the first and only once-weekly diabetes treatment, BYDUREON ^TM (exenatide extended-release for injectable suspension). BYDUREON is an extended-release medication for type 2 diabetes that provides continuous glycemic control in a once-weekly dose. We are also marketing two first-in-class medicines to treat diabetes, BYETTA (exenatide) injection and SYMLIN (pramlintide acetate) injection.

We entered into an agreement and plan of merger with Bristol-Myers Squibb, or BMS, pursuant to which BMS will acquire Amylin for $31.00 per share in cash, pursuant to a cash tender offer and second step merger, or an aggregate purchase price of approximately $5.3 billion. It is anticipated this transaction will be consummated sometime during the third quarter of 2012, at which time Amylin will become a wholly owned subsidiary of BMS and cease to be an independent publicly traded company.

We are continuing our BYDUREON launch efforts. We are also continuing to advance our metreleptin program for the treatment of lipodystrophy, a very rare metabolic condition, and to advance our once-weekly and once monthly exenatide suspension programs. We are also continuing our efforts to develop and obtain approval for the BYDUREON pen with the goal of making the BYDUREON pen delivery system available to patients in 2013. In the near term, we will also focus on maximizing the financial contributions from BYETTA and SYMLIN and continue to operate our business with financial discipline.

Highlights for the six months ended June 30, 2012 and recent activities include:


•	Launched BYDUREON in the U.S, the first and only once-weekly medication approved for the treatment of type 2 diabetes.


•	Received approval from the European Commission for a new use of BYETTA ^® (exenatide twice-daily) as an adjunctive therapy to basal insulin, with or without metformin and/or Actos ^® (pioglitazone), for the treatment of type 2 diabetes in adults who have not achieved adequate glycemic control with these agents.


•	Completed an underwritten public offering of 13.5 million shares of common stock, resulting in net proceeds to Amylin of $206.9 million.

•

Submitted the Chemistry, Manufacturing and Controls, or CMC, section of our Biologics License Application (BLA) with the U.S. Food and Drug Administration, or the FDA, for the use of metreleptin to treat diabetes and/or hypertriglyceridemia (high levels of triglycerides in the bloodstream) in pediatric and adult patients with rare forms of lipodystrophy, a life-threatening, ultra-orphan rare disease. On June 18, 2012, we announced that the FDA is seeking updated data from the submitted clinical studies that remain ongoing. We are actively engaged in ongoing interactions with the agency to seek further guidance with respect to its request and are committed to responding in a timely fashion in order to enable the agency to complete its evaluation of the rolling BLA submission.


•	Received orphan designation from the European Commission for metreleptin for the treatment of rare forms of lipodystrophy.

We maintain a research and early development program focused on novel peptide and protein therapeutics. We have also entered into strategic alliances and business initiatives, including our strategic relationship with Biocon, Limited, or Biocon, to develop pharmaceutical products, including AC165198, a peptide hybrid drug candidate for diabetes, which was developed from our phybrid technology platform. In collaboration with Biocon, we submitted an investigational new drug application, or IND, at the end of 2011 and commenced a phase 1 study for AC165198 in early 2012.

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Our principal executive offices are located at 9360 Towne Centre Drive, San Diego, CA 92121, and our telephone number is (858) 552-2200. We were incorporated in Delaware in September 1987. We maintain a corporate website at www.amylin.com . The reference to our worldwide web address does not constitute incorporation by reference into this report of any of the information contained on our website.

Our periodic and current reports that we file with the SEC are available free of charge on our website at www.amylin.com as soon as reasonably practical after we have electronically filed them with, or furnished them to, the SEC.

Overview Summary

Since our inception in September 1987, we have devoted substantially all of our resources to our research and development programs and, more recently, to the commercialization of our products. All of our revenues prior to 2005 were derived from milestones and amortization of up-front payments under our exenatide collaboration agreement with Lilly, previous SYMLIN collaborative agreements, and previous co-promotion agreements. During 2005, we began to derive revenues from product sales of BYETTA and SYMLIN, and during the first quarter of 2012 we began to derive revenues from product sales of BYDUREON. At June 30, 2012 , our accumulated deficit was approximately $2.8 billion .

At June 30, 2012 , we had $328.4 million in cash, cash equivalents and short-term investments and $10.7 million of restricted cash. Although we have yet to consistently generate positive operating cash flows, we intend to continue to tightly manage our cash in 2012 while investing in working capital to support the launch of BYDUREON. Refer to the discussions under the headings “ Liquidity and Capital Resources ” below and “ Cautionary Factors That May Affect Future Results ” in Part I, Item 1A for further discussion regarding our anticipated future capital requirements.

Application of Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. On an ongoing basis, our actual results may differ significantly from our estimates.

There were no significant changes in critical accounting policies from those at December 31, 2011 . The financial information as of June 30, 2012 should be read in conjunction with the financial statements for the year ended December 31, 2011 , contained in our annual report on Form 10-K filed with the SEC on February 22, 2012.

For a further discussion of our critical accounting policies, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K filed with the SEC on February 22, 2012.

Results of Operations

Comparison of Three and Six Months Ended June 30, 2012 to Three and Six Months Ended June 30, 2011

Net Product Sales

Net product sales consist of shipments of BYDUREON, BYETTA and SYMLIN, less allowances for product returns, rebates, wholesaler chargebacks, wholesaler discounts and prescription vouchers.

The following table provides information regarding net product sales (in millions):



	Three months ended June 30,				Increase/(Decrease)			Six months ended June 30,				Increase/(Decrease)
	2012		2011		Increase/(Decrease)			2012		2011		Increase/(Decrease)
BYDUREON	$	27.9	$	—	$	27.9		$	34.8	$	—	$	34.8
BYETTA	115.2		129.0		(13.8		)	235.8		257.0		(21.2		)
SYMLIN	23.4		25.8		(2.4		)	46.5		48.6		(2.1		)
	$	166.5	$	154.8	$	11.7		$	317.1	$	305.6	$	11.5

We launched BYDUREON in the U.S. in February 2012; net product sales for BYDUREON for the three months ended June 30, 2012 represents the first full quarter of sales of this product and net product sales for BYDUREON for the six months ended June 30, 2012 include the first quarter 2012 initial stocking shipments of the product to our wholesalers. The decrease in

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net product sales for BYETTA for both the three and six month periods ended June 30, 2012 compared to the same periods of 2011 primarily reflects a decline in prescription volume due to market competition, including competition from BYDUREON. The decrease in net product sales for SYMLIN for both the three and six month periods ended June 30, 2012 compared to the same periods of 2011 reflects reduced prescription demand partially offset by the net impact of price increases.

Sales of our products in future periods may be impacted by numerous factors, including current and potential competition, the success of our commercial launch of BYDUREON in the U.S., the potential approval of additional products, including metreleptin, regulatory matters, legislative changes, economic factors and other environmental factors.

Revenues Under Collaborative Agreements

The following table summarizes the components of revenues under collaborative agreements (in millions):



	Three months ended June 30,				Increase/(Decrease)			Six months ended June 30,				Increase/(Decrease)
	2012		2011		Increase/(Decrease)			2012		2011		Increase/(Decrease)
Amortization of up-front payments	$	1.9	$	1.9	$	—		$	3.8	$	3.8	$	—
Royalty and other revenues	1.0		1.4		(0.4		)	2.1		1.4		0.7
	$	2.9	$	3.3	$	(0.4	)	$	5.9	$	5.2	$	0.7

Amortization of up-front payments consist of the amortization of the up-front payment we received from Takeda. Royalty and other revenues primarily consist of royalty revenues from sales of exenatide outside the United States. The royalty revenues commenced upon achieving a cumulative gross margin for sales of exenatide, which was achieved at the end of the first quarter of 2011. Therefore we did not record royalties during the three months ended March 31, 2011 and the three months ended June 30, 2011 was the first full quarter in which royalties were recorded.

For the year ended December 31, 2012 we expect to recognize $7.5 million of collaborative revenue in connection with the ratable amortization of the up-front payment we received from Takeda. We expect to continue to earn royalties on product sales of BYDUREON and BYETTA outside of the United States until commercialization of all exenatide markets outside the United States is transitioned from Lilly to Amylin, which by contract occurs no later than December 31, 2013. In the event the OUS transition does not occur by December 31, 2013, the agreement contains various provisions with respect to future rights and obligations of each party that extend beyond December 31, 2013.

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Costs and Expenses

The following table provides information regarding our costs and expenses (in millions):



	Three months ended June 30,						Increase/ (Decrease)			Six months ended June 30,						Increase/ (Decrease)
	2012			2011			Increase/ (Decrease)			2012			2011			Increase/ (Decrease)
Cost of goods sold	$	35.2		$	11.8		$	23.4		$	69.7		$	24.4		$	45.3
Gross margin %	79		%	92		%	(13		)%	78		%	92		%	(14.0		)%
Selling, general and administrative	$	108.5		$	65.2		$	43.3		$	218.9		$	129.8		$	89.1
Research and development	$	42.3		$	45.1		$	(2.8	)	$	93.5		$	87.0		$	6.5
Collaborative profit sharing	$	—		$	60.7		$	(60.7	)	$	—		$	120.5		$	(120.5	)
Amortization of acquired intangible assets	$	7.8		$	—		$	7.8		$	15.6		$	—		$	15.6
Loss on fair value adjustments	$	0.2		$	—		$	0.2		$	4.1		$	—		$	4.1
Restructuring	$	5.3		$	0.1		$	5.2		$	5.4		$	3.0		$	2.4

Cost of Goods Sold

Cost of goods sold is comprised primarily of manufacturing costs associated with BYDUREON, BYETTA and SYMLIN sales during the period. The gross margin for both the three and six month periods ended June 30, 2012 declined compared to the same periods of 2011 due to the first quarter launch of BYDUREON. For the remainder of 2012 we expect our blended gross margins for BYDUREON, BYETTA and SYMLIN to be approximately 80% as we realize economies of scale in our Ohio manufacturing facility, which has annual operating expenses of approximately $100.0 million. Quarterly fluctuations in gross margins may be influenced by product mix, pricing and the level of sales allowances.

Selling, General and Administrative Expenses

The in

Since obtaining exclusive rights to develop and commercialize exenatide in the U.S. in late 2011, the current year financial results no longer reflect the cost-sharing reimbursements for exenatide-related expenses. Selling, general and administrative expenses increased during both the three and six month periods ended June 30, 2012 compared to the same periods in 2011 primarily due to expenses associated with the U.S. launch of BYDUREON, including the expansion of the Company's sales force, and the absence of cost-sharing reimbursements for exenatide-related expenses.

Research and Development Expenses

Our research and development costs are comprised of salaries and bonuses, benefits and non-cash stock-based compensation; license fees, milestones under license agreements and costs paid to third-party contractors to perform research, conduct clinical trials and develop drug materials and delivery devices; and associated overhead expenses and facilities costs. Reimbursed research and development costs under collaborative arrangements are recorded as a reduction to research and development expenses and are recognized in the period in which the related costs are incurred. We charge direct internal and external program costs to the respective development programs. We also incur indirect costs that are not allocated to specific programs because such costs benefit multiple development programs and allow us to increase our pharmaceutical development capabilities. These consist primarily of facilities costs and other internal shared resources related to the development and maintenance of systems and processes applicable to all of our programs.

Our research and development efforts are focused on diabetes, obesity and other diseases. We also maintain an active discovery research program. In diabetes, we have three approved products, BYDUREON, BYETTA and SYMLIN. In obesity, we continue to work with Takeda under the terms of our collaboration with them.

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The following table provides information regarding our research and development expenses for our major projects (in millions):



	Three months ended June 30,							Six months ended June 30,
	2012		2011		Increase/(Decrease)			2012		2011		Increase/(Decrease)
Diabetes(1)	$	28.8	$	24.4	$	4.4		$	64.2	$	45.8	$	18.4
Obesity(2)	3.0		6.6		(3.6		)	7.0		12.4		(5.4		)
Research and early-stage programs	2.4		4.1		(1.7		)	4.9		7.5		(2.6		)
Indirect costs	8.0		10.0		(2.0		)	17.4		21.3		(3.9		)
	$	42.3	$	45.1	$	(2.9	)	$	93.5	$	87.0	$	6.5

______________________

(1)

Research and development expenses for our diabetes programs consist primarily of costs associated with BYETTA and BYDUREON which were shared by Lilly pursuant to our collaboration agreement which terminated in November 2011. Cost-sharing payments received from Lilly are recorded as a reduction to research and development costs. Cost-sharing payments from Lilly for BYETTA and BYDUREON development expenses were zero and $17.8 million for the three months ended June 30, 2012 and 2011 , respectively, and zero and $35.2 million for the six months ended June 30, 2012 and 2011 , respectively.

(2)

Research and development expenses for our obesity program include costs associated with our collaboration agreement with Takeda. Cost-sharing payments received from Takeda are recorded as a reduction to research and development and were $0.6 million and $2.0 million for the three months ended June 30, 2012 and 2011, respectively, and $1.3 million and $7.0 million for the three and six months ended June 30, 2012 and 2011 , respectively.

The decrease in research and development expenses for the three month period ended June 30, 2012 as compared to the same period in 2011 primarily reflects increased expenses for diabetes programs, offset by decreased expenses for our obesity programs, our research and early-stage programs and a reduction in indirect costs of $2.0 million . The increase in research and development expenses for the six months ended June 30, 2012 as compared to the same period in 2011 primarily reflects increased expenses for diabetes programs partially offset by decreased expenses for our obesity programs, our research and early-stage programs and a reduction in indirect costs. The increase in diabetes program expense for both periods is largely due to the absence of cost-sharing reimbursements for exenatide-related expenses. The resulting increased diabetes expenses are offset by reductions of research and development expense caused by the transfer of BYDUREON manufacturing costs from research and development into cost of goods sold beginning in the quarter ended March 31, 2012, the first period of U.S. commercialization of BYDUREON. The decrease in expense in our obesity programs for both periods primarily reflects reduced development efforts in connection with our Takeda alliance. The decrease in expense in our research and early-stage programs and indirect costs for both periods reflects our ongoing efforts to achieve efficiencies in our business.

Collaborative Profit Sharing

Collaborative profit sharing was zero and $60.7 million for the three months ended June 30, 2012 and 2011 , respectively, and zero and $120.5 million for the six months ended June 30, 2012 and 2011 , respectively, and consists of Lilly’s 50% share of the gross margin for BYETTA in the United States. As further described in Note 6 of the footnotes to our Consolidated Financial Statements, as a result of the Termination Agreement, full responsibility for the commercialization of exenatide in the U.S. was transferred to Amylin effective November 30, 2011. The termination of the Lilly collaboration resulted in the termination of gross margin sharing with Lilly in the U.S. effective December 1, 2011.

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets was $7.8 million and zero for the three months ended June 30, 2012 and 2011 , and $15.6 million and zero for the six months ended June 30, 2012 and 2011 , respectively, and consists of amortization of the intangible asset related to the reacquired economic interest in exenatide for the United States.

Loss on Fair Value Adjustments

Loss on fair value adjustments was $0.2 million and zero for the three months ended June 30, 2012 and 2011 , respectively, and $4.1 million and zero for the six months ended June 30, 2012 and 2011 , respectively, and consist of a fair

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market value adjustment recorded on the Company's loss protection liability payable to Lilly.

Restructuring

During the three and six months ended June 30, 2012 we recorded restructuring charges of $5.3 million and $5.4 million , respectively, consisting primarily of facilities related charges. During the three and six months ended June 30, 211 we recorded restructuring charges of $0.1 million and $3.0 million , respectively, consisting primarily of employee separation costs and asset impairment charges. We are continuing to assess our facility requirements for our San Diego campus and may record additional facilities-related charges over the next several quarters, but cannot quantify the amount at this time.

Interest and Other Expense, net

The following table provides information regarding our interest and other expense, net (in millions):



	Three months ended June 30, 2012									Six months ended June 30, 2012
	2012			2011			Increase/(Decrease)			2012			2011			Increase/(Decrease)
Total interest expense and debt discount amortization:
RSO	$	35.2		$	—		$	35.2		$	68.8		$	—		$	68.8
Convertible Debt	12.1			11.7			0.4			24.1			24.5			(0.4		)
Note payable and other	2.8			1.0			1.8			5.7			1.0			4.7
Total interest expense and debt discount amortization:	50.1			12.7			37.4			98.6			25.5			73.1
Less capitalized interest expense	(7.0		)	(5.8		)	(1.2		)	(14.1		)	(10.2		)	(3.9		)
Interest expense net of capitalized interest	43.1			6.9			36.2			84.5			15.3			69.2
Other expense	1.9			—			1.9			5.8			0.2			5.6
Total interest and other expense	45.0			6.9			38.1			90.3			15.5			74.8
Interest and other income	(0.7		)	(0.4		)	(0.3		)	(1.2		)	(0.7		)	(0.5		)
Total interest and other expense, net	$	44.3		$	6.5		$	37.8		$	89.1		$	14.8		$	74.3

The increase in interest expense and debt discount amortization for both the three and six month periods ended June 30, 2012 is largely due to the interest expense and debt discount amortization associated with the promissory note related to the RSO entered into in connection with the Termination Agreement. There was no such interest in the same period of last year.

Other expense is comprised of losses on fair value adjustments related to derivative instruments embedded in the promissory note related to the RSO and foreign exchange gains and losses. The increase in other expense for both the three and six months ended June 30, 2012 as compared to the same periods of 2011 is primarily due to fair value adjustments on derivative instruments. The fair value adjustments related to the embedded derivative asset recorded during the three months ended June 30, 2012 represents the change in the fair value of the embedded option that would allow Amylin to discharge all or a portion of the RSO obligation in the event that all exenatide products were removed from certain geographic markets for safety or efficacy reasons and remain unsalable for four consecutive years. The fair value adjustment related to the embedded derivative recorded during the six months ended June 30, 2012 represents both the aforementioned adjustment for the three month period as well as a decline in the fair value of the embedded option that relates to BYDUREON approval. Specifically, in the event Amylin did not receive FDA approval of BYDUREON by June 30, 2014, the RSO could have been fully discharged. As FDA approval of BYDUREON was received on January 27, 2012, the option to discharge the RSO obligation is no longer available to us, therefore the value of the related embedded option was reduced to zero.

Interest and other income consists primarily of interest income from investment of cash and other investments. The increase for both the three and six months ended June 30, 2012 as compared to the same periods in 2011 primarily reflects higher average balances available for investment on our short-term investments.

Net Loss

Our net loss for the six months ended June 30, 2012 was $173.3 million compared to a net loss of $68.7 million for the same period in 2011 . The increase in net loss primarily reflects increased cost of goods sold, selling, general and administrative

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expenses, research and development expenses and interest expense offset by reduced collaborative profit-sharing, as discussed above. We may incur operating losses for the next few years. Our ability to reach profitability in the future will be heavily dependent upon the level of product sales that we achieve for BYDUREON, BYETTA, SYMLIN and metreleptin, if approved. Our ability to achieve profitability in the future will also depend on our ability to continue to control our operating expenses, including costs associated with the commercialization of BYDUREON, expenses associated with the continued commercialization of BYETTA and SYMLIN, and expenses associated with our research and development programs, including our obesity and our early-stage development programs and related support infrastructure. Our operating results may fluctuate from quarter to quarter as a result of differences in the timing of expenses incurred and revenues recognized.

Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through public sales and private placements of our common and preferred stock, debt financings, payments received pursuant to our exenatide collaboration with Lilly and our obesity collaboration with Takeda and reimbursement of SYMLIN development expenses through earlier collaboration agreements. Additionally since the second quarter of 2005, we have financed our operations through product sales of BYETTA and SYMLIN and since the first quarter of 2012 through product sales of BYDUREON.

At June 30, 2012 , we had approximately $328.4 million in cash, cash equivalents and short-term investments, compared to $204.1 million at December 31, 2011 . We have demonstrated strong financial discipline over the last few years and we are committed to continuing to manage our expenses closely, in-line with expected revenues. We will continue to aggressively manage our expenses to minimize the amount of cash we use for operating activities. In March, 2012, we completed an underwritten public offering of 13.5 million shares of common stock, resulting in net proceeds to Amylin of $206.9 million . We have $575 million of convertible debt that matures in 2014, a $165 million loan facility from Lilly that matures in 2016 and a $1.2 billion promissory note related to the RSO that matures in 2036. We have entered into an agreement and plan of merger with BMS pursuant to which BMS will acquire Amylin for $31.00 per share in cash, pursuant to a cash tender offer and second step merger, or an aggregate purchase price of approximately $5.3 billion. It is anticipated this transaction will be consummated sometime during the third quarter of 2012, at which time Amylin will become a wholly owned subsidiary of BMS. We cannot assure you that this transaction will be consummated during the third quarter of 2012, if at all. If the transaction is not consummated in a timely fashion or at all, we will continue to evaluate opportunities to refinance existing indebtedness or raise additional funds as needed. If we require additional financing in the future, we cannot assure you that it will be available to us on favorable terms, or at all. Although we have previously been successful in obtaining financing through our debt and equity securities offerings, there can be no assurance that we will be able to do so in the future.

Our operating activities used cash of $82.5 million and provided cash of $41.0 million in the six months ended June 30, 2012 and 2011 , respectively. Our cash used by operating activities in the six months ended June 30, 2012 included cash used due to increases in accounts receivable and inventories of $9.1 million and $31.6 million, respectively, and a decrease in accrued compensation and payable to collaborative partner of $14.1 million and $22.4 million, respectively, offset by a decrease in other current assets of $11.1 million. The increase in accounts receivable is primarily due to the BYDUREON launch. The increase in inventories largely reflects increases in BYDUREON inventories, offset by a reduction in SYMLIN work in process and raw materials inventory due to the timing and volume of production for SYMLIN. The decrease in other current assets is due to a decline in prepaid expenses. The decrease in accrued compensation reflects the payment of annual compensation accruals in the six months ended June 30, 2012. The decrease in payable to collaborative partner reflects the final settlement of payments due by us to Lilly in connection with our former collaboration. The increase in cash used for operations for the six months ended June 30, 2012 compared to the six months ended June 30, 2011 reflects working capital requirements associated with the current period launch of BYDUREON as well as increased operating expenses resulting from the termination of the Lilly collaboration and reacquisition of 100% of the commercialization and development rights for exenatide.

Our investing activities used cash of $151.3 million and $75.3 million for the six months ended June 30, 2012 and 2011 , respectively. Investing activities in both quarters consisted primarily of purchases and sales of short-term investments and purchases of property, plant and equipment, net. Purchases of property, plant and equipment, net were $21.5 million and $25.2 million for the six months ended June 30, 2012 and June 30, 2011 , respectively. Purchases of property, plant and equipment represent costs incurred in connection with the BYDUREON pen device. Through June 30, 2012 , we have expended $649.0 million associated with the construction of the BYDUREON manufacturing facility, which includes costs associated with the construction of the facility, purchase and installation of equipment and capitalized labor and materials required to validate the facility. Through June 30, 2012 we have incurred $236.0 million in capital expenditures associated with the BYDUREON pen device and incurred total combined capital expenditures for the manufacturing facility and the pen device of $885.0 million . Lilly funded a total of $103.4 million of the capital expenditures associated with the BYDUREON pen device prior to the termination of our collaboration with them. We expect that our capital expenditures will be less than $50 million for 2012 and

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will be principally focused on strategically investing in the exenatide life cycle. We will continue to evaluate potential additional investments in our Ohio manufacturing facility during the product life cycle for BYDUREON.

Financing activities provided cash of $229.2 million and $29.6 million for the six months ended June 30, 2012 and 2011 respectively. Financing activities in the six months ended June 30, 2012 include net proceeds of $206.9 million from the previously mentioned common stock offering and $28.3 million from the exercise of stock options and proceeds from our employee stock purchase plan, partially offset by a payment on the revenue sharing obligation of $6.1 million. Financing activities for the six months ended June 30, 2011 include the repayment of our $200 million of 2.5% convertible senior notes, proceeds of $5.4 million from the exercise of stock options and proceeds from our employee stock purchase plan and proceeds of $165.0 million from a line of credit from Lilly.

At June 30, 2012 , our outstanding debt includes a $1.2 billion promissory note related to the RSO that matures December 31, 2036, $575 million of the 2007 Notes due June 15, 2014, and a $165 million loan facility from Lilly that matures June 30, 2016. The 2007 Notes are currently convertible into a total of up to 9.4 million shares of our common stock at approximately $61.07 per share and are not redeemable at our option.

As of June 30, 2012 , we had $10.5 million of standby letters of credit outstanding which are secured by $10.7 million of restricted cash pursuant to a Line of Credit and Cash Collateral Agreement entered into in December 2011.

Use of Non-GAAP Financial Measures and Reconciliations to GAAP Results

We use certain non-GAAP financial measures, which exclude stock-based compensation, amortization of intangible assets, restructuring and acquisition-related charges and infrequently occurring gains and losses in our calculation of operating income or loss. This non-GAAP financial measure is intended to approximate our operating cash flows before working capital changes and should be considered in addition to, not as a substitute for, measures of our financial performance or liquidity prepared in accordance with GAAP. Our non-GAAP financial measures may be defined differently from time to time and may be defined differently than similar terms used by other companies, and accordingly, care should be exercised in understanding how we define our non-GAAP financial measures.

Our management uses non-GAAP financial measures to gain an understanding of the Company's comparative operating performance (when comparing such results with previous periods) and future prospects and excludes these items from its internal financial statements for purposes of its internal budgets and financial goals. These non-GAAP financial measures are used by our management in their financial and operating decision-making because management believes they reflect the Company's ongoing business in a manner that allows meaningful period-to-period comparisons. Our management believes that these non-GAAP financial measures provide useful information to investors and others (a) in understanding and evaluating our current operating performance and future prospects in the same manner as management does, if they so choose, and (b) in comparing in a consistent manner our current financial results with our past financial results.

Our non-GAAP operating loss for the three months ended June 30, 2012 was $13.6 million compared to non-GAAP operating loss of $1.7 million for the same period in 2011 . Our non-GAAP operating loss for the six months ended June 30, 2012 was $43.8 million compared to non-GAAP operating loss of $5.0 million for the same period in 2011 . Our non-GAAP net loss was $19.3 million , or $0.12 per share, for the three months ended June 30, 2012 , compared to $4.4 million , or $0.03 per share, for the same period in 2011 . Our non-GAAP net loss was $53.3 million million or $0.34 per share, for the six months ended June 30, 2012 , compared to $11.1 million , or $0.08 per share, for the same period in 2011 .

A reconciliation of reported GAAP operating loss to non-GAAP operating loss, excluding non-cash items, and GAAP net loss to non-GAAP net loss, excluding non-cash items is provided in the tables that follow (in thousands, unaudited):

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	Three months ended June 30,					Six months ended June 30,
	2012		2011			2012			2011
GAAP operating loss	(29,876	)	$	(24,842	)	$	(84,209	)	$	(53,921	)

Revenue sharing obligation note payments on net exenatide sales	(21,463	)	—			(40,590		)	—
Stock-based compensation	7,207		7,952			16,365			15,868
Other non-cash compensation	3,855		4,343			11,553			8,582
Depreciation and amortization	23,082		12,553			47,324			25,265
Amortization of deferred revenue	(1,875	)	(1,875		)	(3,750		)	(3,750		)
Restructuring	5,254		126			5,405			2,984
Loss on fair value adjustments	200		—			4,147			—

Non-GAAP operating loss	(13,616	)	$	(1,743	)	$	(43,755	)	$	(4,972	)



	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
GAAP net loss	$	(74,221	)	$	(31,408	)	$	(173,261	)	$	(68,732	)

Revenue sharing obligation note payments on net exenatide sales	(21,463		)	—			(40,590		)	—
Stock-based compensation	7,207			7,952			16,365			15,868
Other non-cash compensation	3,855			4,343			11,553			8,582
Depreciation and amortization	23,082			12,553			47,324			25,265
Amortization of deferred revenue	(1,875		)	(1,875		)	(3,750		)	(3,750		)
Restructuring	5,254			126			5,405			2,984
Non-cash interest expense	37,446			3,924			73,052			8,641
Loss on fair value adjustments	1,453			—			10,650			—

Non-GAAP net loss	$	(19,262	)	$	(4,385	)	$	(53,252	)	$	(11,142	)

Non-GAAP net loss per share - basic and diluted	$	(0.12	)	$	(0.03	)	$	(0.34	)	$	(0.08	)

Shares used in computing non-GAAP net loss per share - basic and diluted	163,110			145,849			156,600			145,321

The following table summarizes our contractual obligations and maturity dates as of June 30, 2012 (in thousands):



	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Long-term debt obligations, including interest	$	2,069,737	$	120,732	$	775,989	$	329,400	$	843,616
Inventory purchase obligations	191,365		86,940		92,800		11,625		—
Loss protection liability	50,566		26,713		23,853		—		—
Construction contracts	3,400		3,400		—		—		—
Operating leases	153,463		28,866		54,295		40,930		29,372
Total(1)	$	2,468,531	$	266,651	$	946,937	$	381,955	$	872,988

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(1)	Excludes our obligation of $10.0 million related to deferred compensation, the payment of which is subject to elections made by participants that are subject to change.

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In addition, under certain license and collaboration agreements we are required to pay royalties and/or milestone payments upon the successful development and commercialization of related products. We expect to make development milestone payments of up to $5.3 million associated with licensing agreements in the next 12 months. Additional milestones and other contingency payments of up to approximately $230.1 million could be paid if development and commercialization of all our early stage programs continue and are successful. The significant majority of these milestones relate to potential future regulatory approvals and subsequent sales thresholds. Given the inherent risk in pharmaceutical development, it is highly unlikely that we will ultimately make all of these milestone payments; however, these payments would signify that the related products are moving successfully through development and commercialization.

Our future capital requirements will depend on many factors, including: the amount of product sales we achieve for BYDUREON, BYETTA and SYMLIN; costs associated with the commercialization of BYDUREON and the continued commercialization of BYETTA and SYMLIN; costs associated with the operation of our BYDUREON manufacturing facility; costs of potential licenses or acquisitions; the potential need to repay existing indebtedness; our ability to receive or need to make milestone payments; our ability, and the extent to which we establish collaborative arrangements for exenatide products outside the United States, for SYMLIN or any of our product candidates; progress in our research and development programs and the magnitude of these programs; costs involved in preparing, filing, prosecuting, maintaining, enforcing or defending our patents; competing technological and market developments; and costs of manufacturing, including costs associated with establishing our own manufacturing capabilities or obtaining and validating additional manufacturers of our products; and scale-up costs for our drug candidates.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are currently or reasonably likely to be material to our consolidated financial position or results of operations.


ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk

We invest our excess cash primarily in United States Government securities, asset-backed securities, and debt instruments of financial institutions and corporations with investment-grade credit ratings. These instruments have various short-term maturities. We do not utilize derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions in any material fashion. Accordingly, we believe that, while the instruments held are subject to changes in the financial standing of the issuer of such securities, we are not subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive investments. Our debt is not subject to significant swings in valuation due to changes in interest rates as interest rates on our debt are fixed. The fair value of our 2007 Notes at June 30, 2012 was approximately $585.4 million . A hypothetical 1% adverse move in interest rates along the entire interest rate yield curve would not materially affect the fair value of our financial instruments that are exposed to changes in interest rates.


ITEM 4.	Controls and Procedures

As of June 30, 2012 , an evaluation was performed under the supervision and with the participation of our management, including our President and Chief Executive Officer (referred to as our CEO) and our Senior Vice President, Finance and Chief Financial Officer (referred to as our CFO), of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective at a reasonable level of assurance as of June 30, 2012 .

Our management does not expect that our disclosure control and procedures or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, or misstatements due to error, if any, within the company have been detected. While we believe that our disclosure controls and procedures and internal control over financial reporting are and have been effective, in light of the foregoing we intend to continue to examine and refine our disclosure controls and procedures and internal control over financial reporting.

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An evaluation was also performed under the supervision and with the participation of our management, including our CEO and CFO, of any change in our internal control over financial reporting that occurred during our last fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. That evaluation did not identify any change in our internal control over financial reporting that occurred during our latest fiscal quarter and that has materially affected, or is reasonably likely to affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION


ITEM 1.	Legal Proceedings

Product Liability Litigation

As of June 30, 2012, we and Lilly were involved in approximately 96 separate product liability cases involving approximately 536 plaintiffs in various courts in the United States. Approximately 72 plaintiffs who previously filed cases have subsequently dismissed their cases or claims without prejudice. Certain of these cases have been brought by individuals who allege they have used BYETTA. They generally seek compensatory and punitive damages for alleged injuries, consisting primarily of pancreatitis and, in some cases, alleged wrongful death. Most of the cases are pending in California state court, where the Judicial Council has granted our petition for a “coordinated proceeding” for all California state court cases alleging harm allegedly as a result of BYETTA use. We also have received notice from plaintiffs' counsel of additional claims by individuals who have not filed suit. While we cannot reasonably predict the outcome of any lawsuit, claim or proceeding, we and Lilly intend to vigorously defend these matters. However, if we are unsuccessful in our defense, these matters could result in a material adverse impact to our financial position and results of operations.

Icahn Litigation

On April 12, 2012, an action titled Icahn Partners LP v. Amylin Pharmaceuticals, Inc., Case No. 7418, was filed in the Court of Chancery of the State of Delaware. The complaint asserts claims arising out of the Company's response to the plaintiff's demand to inspect certain books and records of the Company purportedly pursuant to Section 220 of the Delaware General Corporation Law. The complaint seeks an order from the court compelling the Company to provide certain books and records to the plaintiff for purposes of inspection and copying. On April 30, 2012, the Court of Chancery scheduled trial in this action to be held on June 26, 2012 and on June 7, 2012, at Icahn Partners LP's request, the parties entered into a stipulation to postpone the action and to adjourn further discovery, pre-trial proceedings and the scheduled trial indefinitely, which stipulation was approved and entered by the Court of Chancery on June 7, 2012.

Derivative Litigation

On April 4, 2012, a putative Amylin stockholder filed a derivative and putative class action titled Duane Howell v. Paulo F. Costa et al., Case No. 37-2012-00095130, in the Superior Court of the State of California for the County of San Diego (“San Diego Class Action”) against the Company and the Company's Board of Directors (the “Board”). The complaint alleges that the Board breached its fiduciary duties in connection with its response to an offer to acquire the Company. The complaint seeks, among other things, a declaration that the Board breached its fiduciary duties, the establishment of a committee of independent directors or third party to evaluate strategic alternatives and potential offers for the Company, a prohibition of the directors from entering into certain contractual provisions that could harm the Company or its stockholders and an invalidation of the Company's shareholder rights plan. On May 1, 2012, the parties entered into a joint stipulation staying the San Diego Class Action indefinitely.

On June 26, 2012, a putative Amylin stockholder filed a derivative action titled Berger v. Bradbury, et al., 1:12-cv-00824 in the United States District Court for the District of Delaware on behalf of and against the Company as nominal defendant and against the Board. The complaint alleges that the Board breached its fiduciary duties in connection with its response to an offer to acquire the Company. The complaint seeks, among other things, a declaration that the Board breached its fiduciary duties, the establishment of a committee of independent directors or third party to evaluate strategic alternatives and potential offers for the Company, a prohibition of the directors from entering into certain contractual provisions that could harm the Company or its stockholders, an invalidation of the Company's shareholder rights plan, and money damages.

Class Action Litigation

On July 3, 2012, a putative stockholder class action complaint was filed in the Court of Chancery of the State of Delaware, captioned Phillips v. Amylin Pharmaceuticals, Inc., Case No. 7673. The complaint names as defendants the Company, certain officers and directors of the Board (the “Individual Defendants”), Bristol-Myers Squibb and Merger Sub. The complaint asserts two causes of action: breach of fiduciary duty against the Individual Defendants and aiding and abetting a breach of fiduciary duty against Bristol-Myers Squibb and Merger Sub. The complaint includes allegations that the Individual Defendants breached their fiduciary duties by causing the Company to enter into the Merger Agreement, by agreeing to sell the Company at an inadequate price, by failing to maximize the value of the Company and by agreeing to preclusive deal

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protection devices that unduly restrict the ability of other potential acquirers to bid successfully for the Company. Plaintiff seeks an injunction prohibiting consummation of the proposed transaction, rescission and rescissory damages (to the extent the proposed transaction has already been consummated), and fees and costs associated with prosecuting the action.

On July 3, 2012, a putative stockholder class action complaint was filed in the Superior Court of the State of California, County of San Diego, captioned Peterson v. Amylin Pharmaceuticals, Inc., Case No. 37-2012- 00100092-CU-BT-CTL. The complaint names as defendants the Company, the Individual Defendants, Bristol-Myers Squibb, Merger Sub and Does 1-25. The complaint asserts three causes of action: breach of fiduciary duty against the Individual Defendants and Does 1-15, aiding and abetting a breach of fiduciary duty against the Company, and aiding and abetting a breach of fiduciary duty against Bristol-Myers Squibb, Merger Sub and Does 16-25. The complaint includes allegations that the Individual Defendants breached their fiduciary duties by causing the Company to enter into the Merger Agreement, by agreeing to sell the Company at an inadequate price, by failing to maximize the value of the Company and by agreeing to preclusive deal protection devices that unduly restrict the ability of other potential acquirers to bid successfully for the Company. Plaintiff seeks declaratory judgment, an injunction prohibiting consummation of the proposed transaction, rescission and rescissory damages (to the extent the proposed transaction has already been consummated), imposition of a constructive trust, and fees and costs associated with prosecuting the action.

On July 9, 2012, a putative stockholder class action complaint was filed in the Court of Chancery of the State of Delaware, captioned Halberstam v. Amylin Pharmaceuticals, Inc., Case No. 7682. The complaint names as defendants the Company, the Individual Defendants, Bristol-Myers Squibb and Merger Sub. The complaint asserts two causes of action: breach of fiduciary duty against the Individual Defendants and aiding and abetting a breach of fiduciary duty against Bristol-Myers Squibb and Merger Sub. The complaint includes allegations that the Individual Defendants breached their fiduciary duties by causing the Company to enter into the Merger Agreement, by agreeing to sell the Company at an inadequate price, by failing to maximize the value of the Company and by agreeing to preclusive deal protection devices that unduly restrict the ability of other potential acquirors to bid successfully for the Company. Plaintiff seeks an injunction prohibiting consummation of the proposed transaction, rescission or actual and punitive damages (to the extent the proposed transaction has already been consummated), and fees and expenses in connection with the litigation. On July 10, 2012, plaintiff filed a notice and proposed order of voluntary dismissal of the action. On July 20, 2012, the Court of Chancery granted the plaintiff's order of voluntary dismissal and the action was formally dismissed.

On July 10, 2012, a putative stockholder class action complaint was filed in the Court of Chancery of the State of Delaware captioned Solak v. Amylin Pharmaceuticals, Inc. , Case No. 7684. On July 12, 2012, a putative stockholder class action complaint was filed in the court of Chancery of the State of Delaware captioned Jurko v. Amylin Pharmaceuticals, Inc., Case No. 7695. Each complaint names as defendants the Company, the Individual Defendants, Bristol-Myers Squibb and Merger Sub, and each complaint was subsequently consolidated as described below.

On July 10, 2012, the Court of Chancery of the State of Delaware approved a stipulated order of class certification and case management, which certified a conditional class in the case captioned Phillips v. Amylin Pharmaceuticals, Inc. , Case No. 7673-CS (the “Delaware Action”) and named Maxine Phillips as lead plaintiff for the class (the “Lead Plaintiff”). The terms of the order provide that it shall apply to each case subsequently filed in the Court of Chancery or transferred to the Court of Chancery that relate substantially to the same matter as the Delaware Action and that the Lead Plaintiff shall promptly seek to have any such case consolidated with the Delaware Action. The parties to the Delaware Action have agreed to expedited discovery and a preliminary injunction hearing has been scheduled for August 6, 2012.

On July 12, 2012, attorneys for the Lead Plaintiff filed a verified amended class action complaint in connection with the Delaware Action (the “Amended Complaint”). The Amended Complaint names as defendants the Company, the Individual Defendants, the Bristol-Myers Squibb and Merger Sub. The Amended Complaint alleges generally that the Individual Defendants breached their fiduciary duties and Bristol-Myers Squibb and Merger Sub aided and abetted the purported breaches of such fiduciary duties. The Amended Complaint includes allegations that the Individual Defendants breached their fiduciary duties by failing to take steps to maximize the value of Amylin to its public shareholders. The relief sought includes an injunction, rescission (to the extent the proposed transaction has already been consummated) or rescissory damages, exclusion of certain shares from any vote in favor of the proposed transaction, and costs and disbursements, including attorneys' and experts' fees. The description in this paragraph is qualified in its entirety by reference to the Amended Complaint filed as Exhibit (a)(5)(H).

On July 17, 2012, the court entered an order consolidating three of the purported stockholder class action complaints filed in the Court of Chancery of the State of Delaware, captioned Phillips v. Amylin Pharmaceuticals, Inc ., et al., Case No. 7673, Solak v. Amylin Pharmaceuticals, Inc. , et al., Case No. 7684, and Jurko v. Amylin Pharmaceuticals, Inc. , et al., Case No. 7695. The consolidated case is captioned In re Amylin Pharmaceuticals, Inc. Shareholders Litigation, Case No. 7673-CS (the “Consolidated Delaware Action”), and the Amended Complaint is designated as the operative complaint.

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On July 10, 2012, a putative stockholder class action complaint was filed in the Superior Court of California, County of San Diego, captioned Warnock v. Amylin Pharmaceuticals, Inc. , Case No. 37-2012-00100410-CU-SL-CTL. The complaint names as defendants, the Company, the Individual Defendants, Bristol-Myers Squibb and Merger Sub. The complaint alleges generally that the Individual Defendants have violated fiduciary duties owed to public shareholders of the Company, have failed to obtain for such shareholders the highest value available for the Company and have failed to take steps to maximize the value of the Company in a change of control transaction. The complaint alleges that Bristol-Myers Squibb, Merger Sub and the Company have participated in the Individual Defendants' breaches of fiduciary duty and have aided and abetted the wrongdoing alleged therein. The relief sought includes an injunction enjoining the defendants from consummating the proposed transaction, rescission or the award of rescissory damages (in the event that the proposed transaction is consummated), compensatory damages, and the award of the costs and disbursements of the action, including attorneys' and experts' fees.

On July 20, 2012, a putative stockholder class action complaint was filed in the United States District Court of the Southern District of California, captioned Halberstam v. Amylin Pharmaceuticals, Inc. , Case No. 2CV1787 LAB JMA. The complaint names as defendants the Company, the Individual Defendants, Bristol-Myers Squibb and Merger Sub. The complaint alleges generally that the Individual Defendants breached their fiduciary duties under Delaware state law and that the Individual Defendants, Company, Bristol-Myers Squibb and Merger Sub aided and abetted the purported breaches of such fiduciary duties. The complaint also alleges that the Individual Defendants and the Company violated Sections 14(d) and 14(e) of the Exchange Act and the rules promulgated thereunder and that the Individual Defendants violated Section 20(a) of the Exchange Act and the rules promulgated thereunder. The complaint includes allegations that the Individual Defendants breached their fiduciary duties by contractually preventing a higher offer from other interested buyers and attempting to unfairly deprive stockholders of the value of their investment in the Company and by disseminating materially false and misleading statements in connection with the Offer. The relief sought includes declaratory judgment, an injunction prohibiting consummation of the proposed transaction, rescission (in the event the proposed transaction has already been consummated), or actual, rescissory, and/or punitive damages, compensatory damages, including pre-judgment and postjudgment interest, and fees, costs and expenses, including attorneys' and experts' fees and expenses.

On July 20, 2012, a putative stockholder class action complaint was filed in the United States District Court of the Southern District of California, captioned Doucet v. Amylin Pharmaceuticals, Inc. , Case No. 12CV1807WQH JMA. The complaint names as defendants the Company, the Individual Defendants, Bristol-Myers Squibb and Merger Sub. The complaint alleges generally that the Individual Defendants breached their fiduciary duties and that the Company, Bristol-Myers Squibb and Merger Sub aided and abetted the purported breaches of such fiduciary duties. The complaint also alleges that the Individual Defendants and the Company violated Sections 14(d)(4) and 14(e) of the Exchange Act and the rules promulgated thereunder. The complaint includes allegations that the Individual Defendants breached their fiduciary duties by failing to take steps to maximize the value of the Company to its public shareholders and taking steps to avoid competitive bidding, failing to properly value the Company and ignoring or not protecting against the Individual Defendants' conflicts of interests. The complaint further alleges that the Individual Defendants breached their fiduciary duties through materially inadequate disclosures and material disclosure omissions. The relief sought includes declaratory judgment, an injunction prohibiting consummation of the proposed transaction, rescission or an award of rescissory damage (in the event the proposed transaction has already been consummated), and an award of costs, including attorneys' and experts' fees and expenses.

On July 26, 2012, plaintiffs in the California Federal Actions filed a joint Ex Parte Motion for a Preliminary Injunction and Expedited Discovery (the "Joint Motion"). On July 27, 2012, the parties in the Consolidated Delaware Action executed the MOU and agreed to settle all claims in exchange for the Supplemental Disclosures that were filed with the SEC that same day. On July 30, 2012, Defendants file a Motion to Stay the California Federal Actions. On July 30, 2012, after reviewing the Supplemental Disclosures, the plaintiffs in the California Federal Actions withdrew the Joint Motion.


Item 1A.	Risk Factors

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

The following sets forth cautionary factors that may affect our future results, including clarifications to the cautionary factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

We have entered into an agreement and plan of merger with Bristol-Myers Squibb Company, or BMS, pursuant to which a subsidiary of BMS, or the Merger Subsidiary, has initiated a tender offer to purchase all our outstanding shares of common stock at a price of $31.00 per share. Following the closing of the tender offer, if it shall occur, it is intended that the Merger Subsidiary will be merged with and into the Company with the Company surviving such merger. We cannot assure you that the tender offer and merger will close in a timely manner or at all, and there are certain risks associated with the failure or delay of the tender offer and merger to close.

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On June 29, 2012, we entered into an agreement and plan of merger with BMS and the Merger Subsidiary pursuant to which the Merger Subsidiary has initiated a tender offer to purchase all of our outstanding shares of common stock at a price of $31.00 per share. Following the closing of the tender offer, if it shall occur, it is intended that the Merger Subsidiary will be merged with and into the Company with the Company surviving such merger. However, various important factors could impact the timing of the tender offer and merger transactions or whether these transactions will close. These factors include, among other things: the ability of BMS and the Merger Subsidiary to complete the transactions considering the various closing conditions; uncertainties as to how many of our stockholders will tender their stock in the tender offer; the possibility that various closing conditions to the transactions may not be satisfied or waived, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; or that we may incur a material adverse change. If the closing of the tender offer or merger does not occur or if the closing of these transactions is delayed for any reason, the Company may be subject to a number of risks, including that the current trading price of the Company's common stock may reflect a market assumption that the tender offer and merger will be completed, and, therefore, a failure to complete the tender offer or merger could result in a decline in the trading price of our common stock. Additionally, the Company may be required to pay a termination fee of $160,000,000 or reimburse BMS' costs and expenses up to $15,000,000 if the merger agreement is terminated under certain circumstances. Moreover, certain costs relating to the transaction are payable by the Company whether or not the tender offer or merger is completed.

We have a history of operating losses, anticipate future losses and may never become profitable.

We have experienced significant operating losses since our inception in 1987, including losses of $173.3 million for the six months ended June 30, 2012 , $543.4 million in 2011, $152.3 million in 2010 and $186.3 million in 2009. As of June 30, 2012 , we had an accumulated deficit of approximately $2.8 billion . The extent of our future losses and the timing of potential profitability are uncertain, and we may never achieve profitable operations. We have been engaged in discovering and developing drugs since inception, which has required, and will continue to require, significant research and development expenditures. Our three commercial products, BYDUREON, BYETTA and SYMLIN may not be as commercially successful as we expect and we may not succeed in commercializing any of our other drug candidates, including metreleptin to treat lipodystrophy, if approved. We may incur substantial operating losses for at least the next few years. These losses, among other things, have had and will have an adverse effect on our stockholders' equity and working capital. Even if we become profitable, we may not remain profitable.

We began selling, marketing and distributing our first two products, BYETTA and SYMLIN, in 2005, and our third product, BYDUREON, in 2011, and we will depend heavily on the success of those products in the marketplace.

Prior to the launch of BYETTA and SYMLIN in 2005, we had never sold or marketed our own products. Our ability to generate product revenue in the near term depends solely on the success of these products and BYDUREON, which received marketing authorization from the European Commission in June 2011 and FDA approval in January 2012. The ability of BYDUREON, BYETTA and SYMLIN to generate revenue at the levels we expect will depend on many factors, including the following:


•	our ability to successfully launch BYDUREON in the United States;


•	our ability to secure a new partner to assist in the development and commercialization of our exenatide franchise outside the United States;


•	the ability of patients in the current uncertain economic climate to be able to afford our medications or obtain health care coverage that covers our products;


•	acceptance of and ongoing satisfaction with these novel medicines in the United States and foreign markets by the medical community, patients receiving therapy and third party payers;


•	a satisfactory efficacy and safety profile as demonstrated in a broad patient population;


•	successfully expanding and sustaining manufacturing capacity to meet demand;


•	safety concerns in the marketplace for diabetes therapies;


•	the competitive landscape for approved and developing therapies that will compete with the products; and


•	our ability to expand the indications for which we can market the products.

If we encounter safety issues with BYDUREON, BYETTA or SYMLIN or any other drugs we market or fail to comply with extensive continuing regulations enforced by domestic and foreign regulatory authorities, it could cause us to discontinue marketing those drugs, reduce our revenues and harm our ability to generate future revenues, which would negatively impact our financial position.

BYDUREON, BYETTA and SYMLIN, in addition to any other of our drug candidates that may be approved by the FDA, will be subject to continual review by the FDA, and we cannot assure you that newly discovered or developed safety issues will not arise. With the use of any of our marketed drugs by a wide patient population, serious adverse events may occur from time

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to time that initially do not appear to relate to the drug itself, and only if the specific event occurs with some regularity over a period of time does the drug become suspect as having a causal relationship to the adverse event. Some patients taking BYETTA have reported developing pancreatitis. We are working to better understand the relationship between BYETTA and pancreatitis described in some spontaneously reported cases. In keeping with our focus on patient safety, we continue to pursue our drug safety program that includes thorough investigation of individual spontaneous case reports along with clinical and epidemiologic studies. Within the detection limits of an initial epidemiology study which we provided to the FDA, we have not observed an increased incidence of pancreatitis associated with BYETTA use compared to other treatments for diabetes and thus believe a definite causal relationship between BYETTA and pancreatitis has not been proved. In addition, since BYETTA was introduced, we have received other reports of adverse events, including rare reports of acute renal failure in patients using BYETTA, and in pre-clinical studies of BYDUREON, observations were made of C-cell tumors in animals. Although direct relationships have not been established, it may be difficult to rule out any particular direct relationship at any point in time for these or other reports of adverse events or observations that may be made. Any safety issues could cause us to suspend or cease marketing of our approved products, cause us to modify how we market our approved products, subject us to substantial liabilities, and adversely affect our revenues and financial condition.

Moreover, the marketing of our approved products will be subject to extensive regulatory requirements administered by the FDA and other regulatory bodies, including adverse event reporting requirements and the FDA's general prohibition against promoting products for unapproved uses. The manufacturing facilities for our approved products are also subject to continual review and periodic inspection and approval of manufacturing modifications. Manufacturing facilities that manufacture drug products for the United States market, whether they are located inside or outside the United States, are subject to biennial inspections by the FDA and must comply with the FDA's current good manufacturing practice, or cGMP, regulations. The FDA stringently applies regulatory standards for manufacturing. Failure to comply with any of these post-approval requirements can, among other things, result in warning letters, product seizures, recalls, fines, injunctions, suspensions or revocations of marketing licenses, operating restrictions and criminal prosecutions. Any of these enforcement actions, any unanticipated changes in existing regulatory requirements or the adoption of new requirements, or any safety issues that arise with any approved products, could adversely affect our ability to market products and generate revenues and thus adversely affect our ability to continue our business.

The manufacturers of our products and drug candidates also are subject to numerous federal, state, local and foreign laws relating to such matters as safe working conditions, manufacturing practices, environmental protection, fire hazard control and hazardous substance disposal. In the future, our manufacturers may incur significant costs to comply with those laws and regulations, which could increase our manufacturing costs and reduce our ability to operate profitably.

We currently do not manufacture BYETTA and SYMLIN product, our bulk exenatide or pramlintide or our drug candidates and may not be able to obtain adequate supplies. This could cause delays, subject us to product shortages, or reduce product sales. If our BYDUREON manufacturing facility is damaged, rendered inoperable or does not comply with regulatory requirements, we may not be able to obtain an adequate supply of BYDUREON.

The manufacturing of sufficient quantities of newly-approved drug products and drug candidates is a time-consuming and complex process. We currently have no manufacturing capabilities for two of our three marketed drug products, BYETTA and SYMLIN. In order to successfully supply our products and continue to develop our drug candidates we rely on various third parties to provide the necessary manufacturing.

There are a limited number of manufacturers that operate under the FDA's cGMP regulations capable of manufacturing for us. In addition, there are a limited number of bulk drug substance suppliers, cartridge manufacturers and disposable pen manufacturers. If we are not able to arrange for and maintain third-party manufacturing on commercially reasonable terms, or we lose one of our sole source suppliers used for our existing products or for some components of our manufacturing processes for our products or drug candidates, we may not be able to market our products or complete development of our drug candidates on a timely basis, if at all.

Reliance on third-party suppliers limits our ability to control certain aspects of the manufacturing process and therefore exposes us to a variety of significant risks, including, but not limited to, risks to our ability to supply or commercialize our products or conduct clinical trials, risks of reliance on the third-party for regulatory compliance and quality assurance, third-party refusal to supply on a long-term basis, or at all, the possibility of breach of the manufacturing agreement by the third-party and the possibility of termination or non-renewal of the agreement by the third-party, based on its business priorities, at a time that is costly or inconvenient for us. In addition, reliance on single-source suppliers subjects us to the risk of price increases by these suppliers which could negatively impact our operating margins. If any of these risks occur, our product supply will be interrupted resulting in lost or delayed revenues and delayed clinical trials. Our reliance on third-party manufacturers for the production of our commercial products is described in more detail below.

Our Ohio manufacturing facility has been approved by the regulatory authorities in the United States, Europe, Japan, Brazil, Taiwan and Korea for manufacturing BYDUREON for commercial distribution in the respective countries. In order to

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continue manufacturing BYDUREON for these two geographic locations, we must maintain these regulatory approvals. Further, in order to manufacture BYDUREON for commercialization in additional jurisdictions, we will need to gain regulatory approvals from such jurisdictions. We cannot assure you that we will be able to continue to successfully operate our manufacturing facility in accordance with FDA or EMA regulations or the regulations of any other geographic location. In addition, we are dependent on Alkermes to supply us with commercial quantities of the polymer required to manufacture BYDUREON. We also will need to obtain sufficient supplies of diluent, solvents, devices, packaging and other components necessary for commercial manufacture of BYDUREON. We are dependent upon Mallinckrodt and Lonza to manufacture our long-term commercial supply of bulk exenatide, the active ingredient in BYDUREON, and upon single suppliers to produce components for packaging BYDUREON.

Our Ohio facility is currently the only manufacturing capacity available to us for the production of BYDUREON. Equipment failures, natural disasters, power outages or other catastrophic events, such as a severe storm or fire, could cause interruptions or delays in our ability to manufacture BYDUREON. If we experience equipment failures, or our manufacturing facility is damaged by a natural disaster or other catastrophic event, or if severe weather conditions prevent us from delivering BYDUREON to meet market needs in a timely manner, our business, financial condition and operating results could be adversely impacted.

We rely on Bachem and Mallinckrodt to manufacture our long-term commercial supply of bulk exenatide, the active ingredient in BYETTA. In addition, we rely on single-source manufacturers for some of our raw materials used by Bachem and Mallinckrodt to produce bulk exenatide. We also rely on Wockhardt and Baxter to manufacture the dosage form of BYETTA in cartridges. We are further dependent upon Lilly to supply pens for delivery of BYETTA in cartridges.

We rely on Bachem and Lonza to manufacture our commercial supply of bulk pramlintide acetate, the active ingredient contained in SYMLIN. We rely on Wockhardt for the dosage form of SYMLIN in cartridges and Ypsomed AG to manufacture the components for the SYMLIN disposable pen. We also rely on Sharp Corporation for the assembly of the SYMLIN pen.

If any of our existing or future manufacturers cease to manufacture or are otherwise unable to timely deliver sufficient quantities of BYETTA or SYMLIN, in either bulk or dosage form, or other product components, including pens for the delivery of these products, it could disrupt our ability to market our products, subject us to product shortages, reduce product sales and/or reduce our profit margins. Any delay or disruption in the manufacturing of bulk product, the dosage form of our products or other product components, including pens for delivery of our products, could also harm our reputation in the medical and patient communities. In addition, we may need to engage additional manufacturers so that we will be able to continue our commercialization and development efforts for these products or drug candidates. The cost and time to establish these new manufacturing facilities would be substantial.

Our manufacturers have produced BYETTA and SYMLIN for commercial use for approximately seven years, however, unforeseeable risks related to environmental, economic, technical or other issues may be encountered as we, together with our manufacturers, continue to develop familiarity and experience with regard to manufacturing our products. Furthermore, we and the other manufacturers used for our drug candidates may not be able to produce supplies in commercial quantities if our drug candidates are approved. While we believe that business relations between us and our manufacturers are generally good, we cannot predict whether any of the manufacturers that we may use will meet our requirements for quality, quantity or timeliness for the manufacture of bulk exenatide or pramlintide acetate, dosage form of BYETTA or SYMLIN, or pens. Therefore, we may not be able to obtain necessary supplies of products with acceptable quality, on acceptable terms or in sufficient quantities, if at all. Our dependence on third parties for the manufacture of products may also reduce our gross profit margins and our ability to develop and deliver products in a timely manner.

We have a significant amount of indebtedness. We may not be able to make payments on our indebtedness, and we may incur additional indebtedness in the future, which could adversely affect our operations.

In June 2007, we issued $575 million of the 2007 Notes and in May 2011 we borrowed $165 million from Lilly under the Lilly Loan. Our ability to make payments on our debt, including the 2007 Notes and the Lilly Loan, will depend on our future operating performance and ability to generate cash and may also depend on our ability to obtain additional debt or equity financing. During three of the last five years, our operating cash flows were negative and insufficient to cover our fixed costs. We will need to use cash to pay principal and interest on our debt, thereby reducing the funds available to fund our research and development programs, strategic initiatives and working capital requirements. Our ability to generate sufficient operating cash flow and revenues to service our indebtedness and fund our operating requirements will depend on our ability, alone or with others, to successfully develop, manufacture, obtain required regulatory approvals for and market our drug products and candidates, as well as other factors, including general economic, financial, competitive, legislative and regulatory conditions, some of which are beyond our control. Our debt service increases our vulnerabilities to competitive pressures because many of our competitors are less leveraged than we are. If we are unable to generate sufficient operating cash flow and revenues to service our indebtedness and fund our operating requirements, we may be forced to reduce or defer our development programs,

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sell assets or seek additional debt or equity financing, which may not be available to us on satisfactory terms or at all. Our level of indebtedness may make us more vulnerable to economic or industry downturns. If we incur new indebtedness, the risks relating to our business and our ability to service our indebtedness and other financial obligations will intensify.

We have a substantial revenue sharing obligation payable to Lilly that is secured by certain of our assets. If we are unable to make payments on our revenue sharing obligation, our operations and financial position could be harmed.

In connection with the termination of our collaboration with Lilly in November 2011, we incurred a $1.2 billion revenue sharing obligation payable to Lilly, or the Revenue Sharing Obligation, and entered into a promissory note in favor of Lilly in the initial principal amount of $1.2 billion, secured by certain of our assets and certain assets of our subsidiaries. We also entered into a security agreement with Lilly pursuant to which we and our Ohio subsidiary granted to Lilly, as collateral to secure payment of principal, interest and certain expenses under the promissory note, a security interest in intellectual property relating to our exenatide products, United States regulatory approvals relating to our exenatide products, certain third party license agreements, certain deposit accounts into which counterparties of such license agreements are required to make payments, certain third party supply agreements, inventory and a supply agreement for BYDUREON between us and our Ohio subsidiary. Under the promissory note an event of default would occur if we fail to make payments under the Revenue Sharing Obligation, or upon certain other events as set forth in the promissory note. Upon the occurrence and during the continuance of an event of default, all outstanding amounts under the promissory note may be declared due and payable (and in the case of a bankruptcy event of default, such obligations will automatically become due and payable), and Lilly may exercise its rights with respect to the collateral under the security agreement. If Lilly successfully exercises its rights with respect to the collateral, Lilly will be able to, among other things, sell, lease, license or otherwise dispose of the collateral, enforce our rights in the intellectual property, license agreements and supply agreements relating to BYETTA and BYDUREON (including bringing intellectual property infringement actions against third parties and acquiring the rights to receive BYDUREON supply under an intercompany supply agreement between us and our Ohio subsidiary) and directly collect payments from counterparties of the license agreements that such counterparties would otherwise be required to pay to us. Any such successful exercise by Lilly of its rights with respect to the collateral could have a negative impact on our day-to-day operations, financial condition and operating results.

Our ability to generate revenues will be diminished if we fail to obtain acceptable prices or an adequate level of reimbursement for our products from third-party payers.

The continuing efforts of government, private health insurers and other third-party payers to contain or reduce the costs of health care through various means, including efforts to increase the amount of patient co-pay obligations, may limit our commercial opportunity. In the United States, the Federal government recently passed health care reform legislation. Many of the details regarding the implementation of this legislation have yet to be determined and implementation may ultimately adversely affect our business. Further, we expect that there will continue to be a number of federal and state proposals to implement government control over the pricing of prescription pharmaceuticals. In addition, increasing emphasis on managed care in the United States will continue to put pressure on the rate of adoption and pricing of pharmaceutical products.

Significant uncertainty exists as to the reimbursement status of health care products. Third-party payers, including Medicare, are challenging the prices charged for medical products and services. Government and other third-party payers increasingly are attempting to contain health care costs by limiting both coverage and the level of reimbursement for new drugs and by refusing to provide coverage for uses of approved products for disease indications for which the FDA has not granted labeling approval. Third-party insurance coverage may not be available to patients for BYDUREON, BYETTA and/or SYMLIN or any other products we discover and develop. If government and other third-party payers do not provide adequate coverage and reimbursement levels for our products, the market acceptance of these products may be reduced.

Competition in the biotechnology and pharmaceutical industries may result in competing products, superior marketing of other products and lower revenues or profits for us.

There are many companies that are seeking to develop products and therapies for the treatment of diabetes and other metabolic disorders. Our competitors include multinational pharmaceutical and chemical companies, specialized biotechnology firms and universities and other research institutions. A number of our largest competitors, including AstraZeneca, Bristol-Myers Squibb, GlaxoSmithKline, Lilly, Merck & Co., Novartis, Novo Nordisk, Pfizer, Sanofi-Aventis, Roche and Takeda, are pursuing the development or marketing of pharmaceuticals that target the same diseases that we are targeting. For example, in 2010, Novo Nordisk obtained approval of and commercially launched a GLP-1 receptor agonist to treat type 2 diabetes. In addition, Lilly is developing a GLP-1 receptor agonist to treat type 2 diabetes and has announced a global alliance with Boehringer Ingelheim to jointly develop and commercialize a portfolio of diabetes compounds which Lilly has announced includes a SGLT-2 inhibitor and a DPP-IV inhibitor that has been approved by the FDA and the European Commission. These products all compete for patients in the diabetes space. It is possible that the number of companies seeking to develop products

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and therapies for the treatment of diabetes, obesity and other metabolic disorders will increase.

Many of our competitors have substantially greater financial, technical, sales force, human and other resources than we do and may be better equipped to develop, manufacture and market technologically superior products. In addition, many of these competitors have significantly greater experience than we do in undertaking preclinical testing and human clinical studies of new pharmaceutical products and in obtaining regulatory approvals of human therapeutic products. Accordingly, our competitors may succeed in obtaining FDA approval for competing and possibly superior products. Furthermore, now that we have received FDA approval for BYDUREON, BYETTA and SYMLIN, we may also be competing against other companies with respect to our manufacturing and product distribution efficiency and sales and marketing capabilities, areas in which we have limited experience as an organization.

Our target patient population for BYETTA includes people with type 2 diabetes who have not achieved adequate glycemic control with diet and exercise or by using metformin, sulfonylurea and/or a TZD, three common oral therapies for type 2 diabetes, and insulin glargine. Our target population for BYDUREON includes people with type 2 diabetes who have not achieved adequate glycemic control with commonly prescribed oral diabetes therapies and our target population for SYMLIN includes people with either type 2 or type 1 diabetes whose therapy includes multiple mealtime insulin injections per day. Other products are currently in development or exist in the market that may compete directly with the products that we are developing or marketing. Various other products are available or in development to treat type 2 diabetes, including, for example:


•	sulfonylureas;


•	metformin;


•	insulins, including injectable and inhaled versions;


•	TZDs and other PPAR or non-PPAR insulin sensitizers;


•	glinides;


•	DPP-IV inhibitors;


•	incretin/GLP-1 receptor agonists;


•	alpha-glucosidase inhibitors; and


•	sodium-glucose transporter-2 (SGLT-2) inhibitors.

In addition, several companies are developing various approaches, including alternative delivery methods, to improve treatments for type 1 and type 2 diabetes. We cannot predict whether our products will have sufficient advantages to cause health care professionals to adopt them over other products or that our products will offer an economically feasible alternative to other products. Our products could become obsolete before we recover expenses incurred in developing these products.

Our business has a substantial risk of product liability claims, and insurance may not be adequate to cover these claims.

Our business exposes us to potential product liability risks that are inherent in the testing, manufacturing and marketing of human therapeutic products. As of June 30, 2012, we were involved in approximately 96 separate product liability cases, certain of which cases have been brought by individuals who allege they have used BYETTA and generally seek compensatory and punitive damages for alleged injuries, consisting primarily of pancreatitis and, in some cases, alleged wrongful death. We have also been notified of other claims of individuals who have not filed suit. We currently have limited product liability insurance coverage for existing claims and any future related claims and we expect to be largely self-insured for any future product liability risks that are not covered by existing insurance. Product liability claims could result in the imposition of substantial defense costs and liability on us, a recall of products, or a change in the indications for which they may be used. We cannot assure you that our insurance will provide adequate coverage against potential liabilities.

Delays in the conduct or completion of our clinical trials, the analysis of the data from our clinical trials or our manufacturing scale-up activities may result in delays in our planned filings for regulatory approvals of our products or delays in completion of post-marketing studies and requirements, and may adversely affect our ability to enter into new collaborative arrangements.

We cannot predict whether we will encounter problems with any of our completed, ongoing or planned clinical studies that will cause us to delay or suspend our ongoing and planned clinical studies, delay the analysis of data from our completed or ongoing clinical studies or perform additional clinical studies prior to receiving necessary regulatory approvals. We also cannot predict whether we will encounter delays or an inability to create manufacturing processes for drug candidates that allow us to produce drug product in sufficient quantities to be economical, otherwise known as manufacturing scale-up.

If the results of our ongoing or planned clinical studies for our drug candidates are not available when we expect or if we encounter any delay in the analysis of data from our clinical studies or if we encounter delays in our ability to scale-up our manufacturing processes:

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•	we may be unable to complete our development programs;


•	we may have to delay or terminate our planned filings for regulatory approval;


•	we may encounter delays in the completion of post-marketing requirements for our products;


•	we may not have the financial resources to continue research and development of any of our drug candidates; and


•	we may not be able to enter into, if we chose to do so, any additional collaborative arrangements.

Any of the following could delay the completion of our ongoing and planned clinical studies:


•	ongoing discussions with the FDA or comparable foreign authorities regarding the scope or design of our clinical trials;


•	delays in enrolling volunteers;


•	lower than anticipated retention rate of volunteers in a clinical trial;


•	negative results of clinical studies;


•	insufficient supply or deficient quality of drug candidate materials or other materials necessary for the performance of clinical trials;


•	our inability to reach agreement with any future collaboration partner(s) regarding the scope, design, conduct or costs of clinical trials outside the United States with respect to BYETTA, BYDUREON or an exenatide suspension formulation; or


•	serious side effects experienced by study participants relating to a drug candidate, or other clinical trial observations that may pose a potential safety concern.

We and Lilly terminated our exenatide development and commercialization collaboration in late 2011 whereupon we became solely responsible for the development and commercialization of our exenatide products within the United States. Accordingly, Lilly no longer shares exenatide development or commercialization costs and Lilly's sales force is no longer available for commercializing our exenatide products within the United States. We cannot assure you that our exenatide development and commercial efforts will produce the results we expect.

In November 2011, we and Lilly terminated our 10-year collaboration under which Lilly assisted us in the development, production and commercialization of our exenatide products and shared certain exenatide development, production and commercialization costs. Further, a significant number of Lilly's sales representatives were available for commercializing our exenatide products within the United States. As a result of the termination of our collaboration, we are now solely responsible for developing and commercializing exenatide within the United States. In addition, we will be responsible for many of the functions previously performed by Lilly during the course of our collaboration which we are in the process of transitioning from Lilly to us. While we believe we have an effective transition plan in place for assuming these responsibilities, our exenatide development, production and commercialization efforts may be impaired without the assistance or financial support of a collaboration partner. We cannot assure you that our efforts to transition Lilly's collaboration responsibilities will proceed according to plan. In addition, we have retained a contract sales force to extend the reach of our sales and marketing organization in order to maintain a comparable level of coverage previously provided by the Lilly field force. Although the new sales organization consists of sales professionals with experience in the pharmaceutical industry, including many with experience selling diabetes products, we cannot assure you that their sales efforts will be effective or produce the results we expect.

We are substantially dependent on our arrangement with Lilly and expect to be substantially dependent on BMS for the development and commercialization of our exenatide products outside the United States. We are also dependent and Alkermes' technology for the production of BYDUREON.

Upon termination of our collaboration with Lilly, we entered into an arrangement with Lilly, who currently markets its own diabetes therapies and is developing additional diabetes drug candidates, to commercialize BYDUREON and BYETTA outside the United States through a transition period until December 31, 2013 or at such later date if (i) mutually agreed by us and Lilly in the event such transition has not occurred by December 31, 2013 or (ii) in certain circumstances as set forth in our transition agreement with Lilly. We entered into this short-term arrangement with Lilly in order to:


•	fund some of our research and development activities;


•	assist us in seeking and obtaining regulatory approvals; and


•	assist us in the successful commercialization of BYDUREON, BYETTA and any other future exenatide products.

In general, we cannot control the amount and timing of resources that any collaboration partner(s) may devote to our collaboration. If Lilly fails to assist in the further development of our exenatide products or the commercialization of BYDUREON or BYETTA, or if Lilly's efforts are not effective, our business may be negatively affected. Following the merger with the Merger Subsidiary we expect to transition Lilly's responsibilities to BMS. If the merger with the Merger Subsidiary does not close, we cannot be certain that we will be able to secure an alternative partner to develop and commercialize our

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exenatide products outside the United States on terms acceptable to us, or at all.

Our collaborations may not continue or result in additional successfully commercialized drugs. If any of our partners ceased funding and/or developing and commercializing BYETTA or BYDUREON, we would have to seek additional sources for funding and may have to delay, reduce or eliminate one or more of our commercialization and development programs for these products. If any of our partners do not successfully commercialize BYETTA or BYDUREON outside the United States, we may receive limited or no revenues from them. In addition, we are dependent on Alkermes' technology for manufacturing BYDUREON. If Alkermes' technology does not continue to effectively deliver exenatide in a sustained release formulation, or Alkermes does not devote sufficient resources to the collaboration, our efforts to produce sustained release formulations of exenatide could be curtailed.

If our patents are determined to be unenforceable or if we are unable to obtain new patents based on current patent applications or for future inventions, we may not be able to prevent others from using our intellectual property. If we are unable to obtain licenses to third party patent rights for required technologies, we could be adversely affected.

We own or hold exclusive rights to many issued United States patents and pending United States patent applications related to the development and commercialization of exenatide, including BYETTA and BYDUREON, SYMLIN and our other drug candidates. These patents and applications cover composition-of-matter, medical indications, methods of use, formulations and other inventive results. We have issued and pending applications for formulations of BYETTA and BYDUREON, but we do not have a composition-of-matter patent covering exenatide. We also own or hold exclusive rights to various foreign patent applications that correspond to issued United States patents or pending United States patent applications.

Our success will depend in part on our ability to obtain patent protection for our products and drug candidates and technologies both in the United States and other countries. We cannot guarantee that any patents will issue from any pending or future patent applications owned by or licensed to us. Alternatively, a third party may successfully challenge or circumvent our patents. Our rights under any issued patents may not provide us with sufficient protection against competitive products or otherwise cover commercially valuable products or processes. For example, our SYMLIN, BYETTA and BYDUREON products are subject to the provisions of the Drug Price Competition and Patent Term Restoration Act of 1984, also known as the “Hatch-Waxman Act,” which provides data exclusivity for a certain period of time. Under the Hatch-Waxman Act, the data exclusivity period for SYMLIN and BYETTA expired in 2009 such that generic manufacturers can now file Abbreviated New Drug Applications, or ANDAs, requesting the FDA's approval of generic versions of previously-approved products. If an ANDA is filed for one of our approved products prior to expiration of the patents covering those products, it could result in our initiating patent infringement litigation to enforce our rights. We can provide no assurances that we would prevail in such an action or in any challenge related to our patent rights.

In addition, because patent applications in the United States are maintained, in general, in secrecy for 18 months after the filing of the applications, and publication of discoveries in the scientific or patent literature often lag behind actual discoveries, we cannot be sure that the inventors of subject matter covered by our patents and patent applications were the first to invent or the first to file patent applications for these inventions. Third parties have filed, and in the future are likely to file, patent applications on inventions similar to ours. From time-to-time we have participated in, and in the future are likely to participate in, interference proceedings declared by the United States Patent and Trademark Office to determine priority of invention, which could result in a loss of our patent position. We have also participated in, and in the future are likely to participate in, opposition proceedings against our patents in other jurisdictions, such as Europe and Australia. Furthermore, we may not have identified all United States and foreign patents that pose a risk of infringement.

We also rely upon licensing opportunities for some of our technologies. We cannot be certain that we will not lose our rights to certain patented technologies under existing licenses or that we will be able to obtain a license to any required third-party technology. If we lose our licensed technology rights or if we are not able to obtain a required license, we could be adversely affected.

We may be unable to obtain regulatory clearance and pricing approval to market our drug candidates in the United States or foreign countries on a timely basis, or at all.

Our drug candidates are subject to extensive government regulations related to development, clinical trials, manufacturing and commercialization. The process of obtaining FDA and other regulatory approvals is costly, time-consuming, uncertain and subject to unanticipated delays. Regulatory authorities may refuse to approve an application for approval of a drug candidate, such as metreleptin for the treatment of lipodystrophy, if they believe that applicable regulatory criteria are not satisfied. Regulatory authorities may also require additional testing for safety and efficacy. Moreover, if the FDA grants regulatory approval of a product, the approval may be limited to specific indications or limited with respect to its distribution, and expanded or additional indications for approved drugs may not be approved, which could limit our revenues. Foreign regulatory

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authorities may apply similar limitations or may refuse to grant any approval. Further, even if approval is granted, there can be no assurance that the regulatory authority will grant pricing approval for the drug. Unexpected changes to the FDA or foreign regulatory approval process could also delay or prevent the approval of our drug candidates.

The data collected from clinical trials and our other development activities may not be sufficient to support approval of our drug candidates or additional or expanded indications by the FDA or any foreign regulatory authorities. Biotechnology stock prices have declined significantly in certain instances where companies have failed to meet expectations with respect to FDA approval or the timing for FDA approval. If the FDA's or any foreign regulatory authority's response is delayed or not favorable for any of our drug candidates our stock price could decline significantly.

Moreover, manufacturing facilities operated by us or by the third-party manufacturers with whom we may contract to manufacture our unapproved drug candidates may not pass an FDA or other regulatory authority inspections. Any corrective actions we may need to take as a result of regulatory inspections could cause us or any of our business partners to delay marketing these drug candidates.

Consequently, even if we believe that preclinical and clinical data and our other development activities are sufficient to support regulatory approval for our drug candidates, the FDA and foreign regulatory authorities may not ultimately approve our drug candidates for commercial sale in any jurisdiction. If our drug candidates are not approved, our ability to generate revenues may be limited, our manufacturing facility could become impaired, and our business will be adversely affected.

Litigation regarding patents and other proprietary rights may be expensive, cause delays in bringing products to market and harm our ability to operate.

Our success will depend in part on our ability to operate without infringing the proprietary rights of third parties and preventing others from infringing our patents. Challenges by pharmaceutical companies against the patents of competitors are common. Legal standards relating to the validity of patents covering pharmaceutical and biotechnological inventions and the scope of claims made under these patents are still developing. As a result, our ability to obtain and enforce patents is uncertain and involves complex legal and factual questions. Third parties may challenge, in courts or through patent office proceedings, or infringe upon, existing or future patents. In the event that a third party challenges a patent, a court or patent office may invalidate the patent or determine that the patent is not enforceable. Proceedings involving our patents or patent applications or those of others could result in adverse decisions about:


•	the patentability of our inventions, products and drug candidates; and/or


•	the enforceability, validity or scope of protection offered by our patents.

The manufacture, use or sale of any of our products or drug candidates may infringe on the patent rights of others. If we are unable to avoid infringement of the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court. Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to successfully defend an infringement action or have infringing patents declared invalid, we may:


•	incur substantial monetary damages;


•	encounter significant delays in bringing our drug candidates to market; and/or


•	be precluded from participating in the manufacture, use or sale of our products or drug candidates or methods of treatment requiring licenses.

We are subject to “fraud and abuse” and similar laws and regulations, and a failure to comply with such regulations or prevail in any litigation related to noncompliance could harm our business.

We are subject to various health care “fraud and abuse” laws, such as the Federal False Claims Act, the federal anti-kickback statute and other state and federal laws and regulations. Pharmaceutical companies have faced lawsuits and investigations pertaining to violations of these laws and regulations. We cannot guarantee that measures that we have taken to prevent such violations, including our corporate compliance program, will protect us from future violations, lawsuits or investigations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

Our financial results will fluctuate, and these fluctuations may cause our stock price to fall.

Forecasting our future revenues is difficult, especially since we launched our first products, BYETTA and SYMLIN, in 2005 and recently launched a third product, BYDUREON, for commercial sale in the United States in early 2012. The level of

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market acceptance of these novel products may change rapidly. In addition, our customer base is highly concentrated with four customers accounting for most of our net product sales. Fluctuations in the buying patterns of these customers, which may result from seasonality, wholesaler buying decisions or other factors outside of our control, could significantly affect the level of our net sales on a period to period basis. As a result, it is reasonably likely that our financial results will fluctuate to an extent that may not meet with market expectations and that also may adversely affect our stock price. There are a number of other factors that could cause our financial results to fluctuate unexpectedly, including:


•	product sales;


•	cost of product sales;


•	achievement and timing of research and development milestones;


•	collaboration revenues;


•	cost and timing of clinical trials, regulatory approvals and product launches;


•	marketing and other expenses;


•	manufacturing or supply issues; and


•	potential acquisitions of businesses and technologies and our ability to successfully integrate any such acquisitions into our existing business.

We may require additional financing in the future, which may not be available to us on favorable terms, or at all.

We intend to use our available cash for:


•	Commercialization of BYDUREON, BYETTA and SYMLIN, including activities associated with the commercial launch of BYDUREON in 2012;


•	Satisfaction of our financial obligations to Lilly, including a $1.2 billion revenue sharing obligation;


•	Establishment of additional manufacturing sources and maintenance of our Ohio manufacturing facility;


•	Development of our pipeline candidates;


•	Our other research and development activities;


•	Other operating expenses;


•	Potential acquisitions or investments in complementary technologies or businesses; and


•	Other general corporate purposes.

We may also be required to use our cash to pay principal and interest on outstanding debt, including $575 million in outstanding principal amount of convertible senior notes due in 2014, referred to as the 2007 Notes, and $165 million of an unsecured loan from Lilly that is due in 2016, referred to as the Lilly Loan.

If we require additional financing in the future, we cannot assure you that it will be available to us on favorable terms, or at all. Although we have previously been successful in obtaining financing through our debt and equity securities offerings, there can be no assurance that we will be able to so in the future, especially given the current adverse economic and credit conditions.

Our investments in marketable debt securities are subject to credit and market risks that may adversely affect their fair value.

We maintain a portfolio of investments in marketable debt securities which are recorded at fair value. Although we have established investment guidelines relative to diversification and maturity with the objective of maintaining safety of principal and liquidity, credit rating agencies may reduce the credit rating of our individual holdings which could adversely affect their value. Lower credit quality and other market events, such as increases in interest rates, and further deterioration in the credit markets may have an adverse effect on the fair value of our investment holdings and cash position.

Our ability to enter into and maintain third-party relationships is important to our successful development and commercialization of BYDUREON, BYETTA, SYMLIN and our other drug candidates and to our potential profitability.

We have entered into an agreement with a contract sales force to expand the reach of our sales organization for marketing BYDUREON, BYETTA and SYMLIN within the United States. If we are successful in our efforts to secure one or more collaboration partners to develop and commercialize our exenatide products outside the United States, we will be substantially dependent on these partners for such activities relating to BYDUREON and BYETTA, and any other sustained-release formulations of exenatide, if approved. We believe that we will likely need to enter into marketing and distribution arrangements with third parties for, or find a corporate partner who can provide support for, the development and commercialization of SYMLIN or our other drug candidates outside the United States. We may also enter into arrangements with third parties for the commercialization of our other drug candidates within the United States.

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We may not be able to enter into marketing and distribution arrangements or find a corporate partner for SYMLIN or our other drug candidates as we deem necessary. If we are not able to enter into a marketing or distribution arrangement or find a corporate partner who can provide support for commercialization of our drug candidates as we deem necessary, we may not be able to successfully perform these marketing or distribution activities. Moreover, any new marketer or distributor or corporate partner for our drug candidates with whom we choose to contract may not establish adequate sales and distribution capabilities or gain market acceptance for our products, if any.

We may be required to redeem our convertible senior notes upon a designated event.

Holders of the 2007 Notes may require us to redeem all or any portion of their notes upon the occurrence of certain designated events which generally involve a change in control of our company. We may not have sufficient cash funds to redeem the 2007 Notes upon a designated event. If we are prohibited from redeeming the 2007 Notes, we could seek consent from our lenders to redeem the 2007 Notes. If we are unable to obtain their consent, we could attempt to refinance the 2007 Notes. If we were unable to obtain a consent or refinance, we would be prohibited from redeeming the 2007 Notes. If we were unable to redeem the 2007 Notes upon a designated event, it would result in an event of default under the indentures governing the 2007 Notes. An event of default under the indentures could result in a further event of default under our other then-existing debt. In addition, the occurrence of a designated event may be an event of default under our other debt.

If our research and development programs fail to result in additional drug candidates, the growth of our business could be impaired.

Certain of our research and development programs for drug candidates are at an early stage and will require significant research, development, preclinical and clinical testing, manufacturing scale-up activities, regulatory approval and/or commitments of resources before commercialization. We cannot predict whether our research will lead to the discovery of any additional drug candidates that could generate additional revenues for us.

Our future success depends on our chief executive officer, and other key executives and our ability to attract, retain and motivate qualified personnel.

We are highly dependent on our chief executive officer, and the other principal members of our executive and scientific teams. The unexpected loss of the services of any of these persons might impede the achievement of our research, development and commercialization objectives. Recruiting and retaining qualified sales, marketing, regulatory, manufacturing, scientific and other personnel and consultants will also be critical to our success. We may not be able to attract and retain these personnel and consultants on acceptable terms given the competition between numerous pharmaceutical and biotechnology companies. We do not maintain “key person” insurance on any of our employees.

We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.

In order to protect our proprietary technology and processes, we rely in part on confidentiality agreements with our corporate partners, employees, consultants, manufacturers, outside scientific collaborators and sponsored researchers and other advisors. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets and proprietary information.

Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

Our research and development activities and planned manufacturing activities involve the use of hazardous materials, which subject us to regulation, related costs and delays and potential liabilities.

Our research and development and our planned manufacturing activities involve the controlled use of hazardous materials, chemicals and various radioactive compounds. Although we believe that our research and development safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. In addition, as part of the development of our planned manufacturing activities, we will need to develop additional safety procedures for the handling and disposing of hazardous materials. If an accident occurs, we could be held liable for resulting damages, which could be substantial. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate any of these laws or regulations.

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We are exposed to potential risks from legislation requiring companies to evaluate internal control over financial reporting.

The Sarbanes-Oxley Act requires that we report annually on the effectiveness of our internal control over financial reporting. Among other things, we must perform systems and processes evaluation and testing. We must also conduct an assessment of our internal control to allow management to report on, and our independent registered public accounting firm to attest to, our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. In connection with our Section 404 compliance efforts, we have incurred or expended, and expect to continue to incur or expend, substantial accounting and other expenses and significant management time and resources. We have implemented certain remediation activities resulting from our ongoing assessment of internal control over financial reporting. Our future assessment, or the future assessments by our independent registered public accounting firm, may reveal material weaknesses in our internal control. If material weaknesses are identified in the future we would be required to conclude that our internal control over financial reporting is ineffective and we could be subject to sanctions or investigations by the Securities and Exchange Commission, the NASDAQ Stock Market or other regulatory authorities, which would require additional financial and management resources and could adversely affect the market price of our common stock.

We have implemented anti-takeover provisions that could discourage or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders, and as a result our management may become entrenched and hard to replace.

Provisions in our certificate of incorporation and bylaws could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders. These provisions include:


•	allowing our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors;


•	allowing our board of directors to issue, without stockholder approval, up to 5.5 million shares of preferred stock with terms set by the board of directors;


•	limiting the ability of holders of our outstanding common stock to call a special meeting of our stockholders; and


•	preventing stockholders from taking actions by written consent and requiring all stockholder actions to be taken at a meeting of our stockholders.

Each of these provisions, as well as selected provisions of Delaware law, could discourage potential takeover attempts, could adversely affect the trading price of our securities and could cause our management to become entrenched and hard to replace. In addition to provisions in our charter documents and under Delaware law, an acquisition of our company could be made more difficult by our employee benefits plans and our employee change in control severance plan, under which, in connection with a change in control and termination of employment, stock options and other equity grants held by our employees may become vested and our officers may receive severance benefits.

Our executive officers, directors and major stockholders control approximately 35% of our common stock.

As of June 30, 2012, executive officers, directors and holders of approximately 5% or more of our outstanding common stock, in the aggregate, owned or controlled approximately 35% of our outstanding common stock. As a result, these stockholders are able to influence all matters requiring approval by our stockholders, including the election of directors and the approval of corporate transactions. This concentration of ownership may also delay, deter or prevent a change in control of our company and may make some transactions more difficult or impossible to complete without the support of these stockholders.

Substantial future sales of our common stock by us or our existing stockholders or the conversion of our convertible senior notes to common stock could cause the trading price of our common stock to fall.

Sales by us or our existing stockholders of a large number of shares of our common stock in the public market or the perception that additional sales could occur could cause the trading price of our common stock to drop. Likewise, the issuance of shares of common stock upon conversion of our convertible notes or redemption of our convertible notes upon a designated event, or upon additional convertible debt or equity financings or other share issuances by us, including shares issued in connection with potential future strategic alliances, could adversely affect the trading price of our common stock. Our convertible notes are currently convertible into a total of up to 9.4 million shares. In addition, the existence of these notes may encourage short selling of our common stock by market participants.

Significant volatility in the market price for our common stock could expose us to litigation risk.

The market prices for securities of biopharmaceutical and biotechnology companies, including our common stock, have historically been highly volatile, and the market from time to time has experienced significant price and volume fluctuations

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that are unrelated to the quarterly operating performance of these biopharmaceutical and biotechnology companies. Since January 1, 2010, the high and low sales price of our common stock varied significantly, as shown in the following table:



	High		Low
Year ending December 31, 2012
Third Quarter (through July 30, 2012)	$	30.86	$	30.64
Second Quarter	$	28.49	$	22.25
First Quarter	$	25.84	$	10.68
Year ending December 31, 2011
Fourth Quarter	$	12.23	$	8.03
Third Quarter	$	14.60	$	9.12
Second Quarter	$	14.28	$	11.00
First Quarter	$	16.65	$	10.25
Year ending December 31, 2010
Fourth Quarter	$	21.95	$	9.51
Third Quarter	$	22.09	$	17.81
Second Quarter	$	24.21	$	14.85
First Quarter	$	23.93	$	14.13

Given the uncertainty of our future funding, whether BYDUREON, BYETTA and SYMLIN will meet our expectations, and the regulatory approval of our other drug candidates, we may continue to experience volatility in our stock price for the foreseeable future. In addition, the following factors may significantly affect the market price of our common stock:


•	our financial results and/or fluctuations in our financial results;


•	our ability to satisfy our significant financial obligations to Lilly;


•	safety issues with BYDUREON, BYETTA, SYMLIN or our product candidates;


•	any requirement to restate financial results due to changing interpretation of the application of accounting principles that would have a significant effect on Amylin's reported results of operations and financial condition;


•	progress or set-backs in our development programs, including clinical study results;


•	determinations by regulatory authorities with respect to our drug candidates;


•	developments in our relationships with current or future collaborative partners, including any partner for the development and commercialization of exenatide outside the United States;


•	our ability to successfully execute our commercialization strategies;


•	developments in our relationships with third-party manufacturers of our products and other parties who provide services to us;


•	technological innovations or new commercial therapeutic products by us or our competitors;


•	developments in patent or other proprietary rights; and


•	governmental policy or regulation, including with respect to pricing and reimbursement.

Broad market and industry factors, including any speculation with respect to a potential corporate control or other strategic transaction, also may materially affect the market price of our common stock (either upward or downward), regardless of our actual operating performance. Periods of volatility in the market price of our common stock may expose us to securities class-action litigation, and we may be the target of such litigation as a result of market price volatility in the future.

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ITEM 6.	Exhibits

The following exhibits are included as part of this report:




Exhibit Number	Description

2.1	Agreement and Plan of Merger, dated as of June 29, 2012, by and among the Registrant, Bristol-Myers Squibb Company and B&R Acquisition Company (filed as an exhibit to Registrant's Current Report on Form 8-K filed on July 2, 2012 and incorporated herein by reference)
3.1	Amended and Restated Certificate of Incorporation (filed as an exhibit to Registrant's registration statement on Form S-1 (File No. 333-44195) or amendments thereto and incorporated herein by reference)

3.2	Fourth Amended and Restated Bylaws (filed as an exhibit to Registrant's Current Report on Form 8-K filed on December 8, 2008 and incorporated herein by reference)

3.3	Certificate of Amendment of Amended and Restated Certificate of Incorporation (filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 and incorporated herein by reference)

3.4	Certificate of Amended and Restated Certificate of Incorporation (filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 and incorporated herein by reference)

4.1	Reference is made to Exhibits 3.1 - 3.4

4.2	Specimen Common Stock Certificate (filed as an exhibit to Registrant's registration statement on Form S-1 (File No. 333-44195) or amendments thereto and incorporated herein by reference)

4.3	Indenture, dated as of June 8, 2007, between Registrant and the Bank of New York Trust Company, N.A. (as Trustee) (filed as an exhibit to Registrant's Current Report on Form 8-K filed on June 8, 2007 and incorporated herein by reference)

4.4	Loan Agreement, dated October 16, 2008, between Registrant and Eli Lilly and Company (filed as an exhibit to Registrant's Annual Report on Form 10-K filed on February 27, 2009 and incorporated herein by reference)

4.5	Secured Promissory Note, dated November 7, 2011, from Registrant to Eli Lilly and Company (filed as an exhibit to Registrant's Annual Report on Form 10-K filed on February 22, 2012 and incorporated herein by reference)

4.6	Security Agreement, dated November 7, 2011, and First Amendment thereto, dated January 5, 2012, among Registrant, Registrant's wholly-owned subsidiary, Amylin Ohio LLC, other grantor parties thereto, and Eli Lilly and Company (filed as an exhibit to Registrant's Annual Report on Form 10-K filed on February 22, 2012 and incorporated herein by reference)*

4.7	Subsidiary Guarantee Agreement, dated November 7, 2011, by Registrant's wholly-owned subsidiary, Amylin Ohio LLC and each of the other parties thereto in favor of Eli Lilly and Company (filed as an exhibit to Registrant's Annual Report on Form 10-K filed on February 22, 2012 and incorporated herein by reference)

4.8	Amended and Restated Loan Agreement, dated November 7, 2011, between Registrant and Eli Lilly and Company (filed as an exhibit to Registrant's Annual Report on Form 10-K filed on February 22, 2012 and incorporated herein by reference)

4.9	Amended and Restated Promissory Note, dated November 7, 2011, from Registrant and Eli Lilly and Company (filed as an exhibit to Registrant's Annual Report filed on Form 10-K on February 22, 2012 and incorporated herein by reference)

10.1	Amendment to Commercial Supply Agreement, dated April 17 2012, between Registrant and Bachem Americas, Inc.*

10.2	Sixth Amendment to Exenatide Manufacturing Agreement, dated June 25, 2012, between Registrant and Mallinckrodt LLC*

10.3	Assumption Agreement, dated as of June 29, 2012, by and between Registrant and Bristol-Myers Squibb Company (filed as an exhibit to Registrant's Current Report on Form 8-K filed on July 2, 2012 and incorporated herein by reference)
31.1	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended

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31.2	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended

32.1	Certifications Pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101	The following financial statements and footnotes from the Amylin Pharmaceuticals, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive Loss; (iv) Consolidated Statements of Cash Flows; and (v) the notes to the consolidated financial statements
_______

*Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		Amylin Pharmaceuticals, Inc.
Date:	August 3, 2012	By:	/S/ MARK G. FOLETTA
			Mark G. Foletta,
			Senior Vice President, Finance and Chief Financial Officer (on behalf of the registrant)