Carl Icahn sued Amylin Pharmaceuticals Inc to block enforcement of a bylaw that prevents the billionaire investor from launching a proxy fight that could lead to a sale of the maker of diabetes drugs.

Icahn, whose 8.94 percent stake has made him Amylin's third-largest shareholder, faulted the company for failing to reveal its rejection of a $3.5 billion unsolicited takeover bid, or $22 per share, from Bristol-Myers Squibb Co.

In a complaint filed in Delaware Chancery Court, Icahn urged that Amylin not be allowed to enforce a bylaw requiring shareholders to provide advance notice of board candidates.

The activist investor said shareholders deserve another chance to nominate directors who could push for a sale, given developments since the original January 25 deadline.

Based in San Diego, Amylin makes diabetes medications that include Bydureon, Byetta and Symlin.

Amylin is at a crossroads -- it can be sold, now, at a significant premium, or it can continue to attempt to market its products, which may be lucrative if successful, but which entails substantial risk, the complaint said. Stockholders of Amylin should be given the choice.

Icahn has a long history of activism in healthcare, including engineering a $6.5 billion sale of ImClone Systems Inc to Eli Lilly & Co and winning two board seats at biotechnology company Biogen Idec Inc.

We believe Mr. Icahn's lawsuit is without merit, Amylin said in a statement. Amylin's board is fully aware of its fiduciary duties, and is committed to always acting in the best interests of all stockholders.

The Bristol-Myers bid valued Amylin at $22 per share, a person familiar with the matter said last week.

Shares of Amylin have risen more than 50 percent since news of the bid surfaced on March 28. The shares peaked two days later at $25.84, their highest since August 2008, and Icahn said the company can and should be sold at a premium.

Analysts at Jefferies & Co and BMO Capital Markets have set respective price targets of $32 and $31 for Amylin, citing sales prospects for Bydureon. The type 2 diabetes treatment became available by prescription in U.S. pharmacies in February.

In the complaint, Icahn attacked Amylin's board for publicly offering 13 million shares for $15.62 each on March 8 without revealing it had earlier rejected the Bristol-Myers bid.

He also objected to a March 6 grant of stock options to various executives, including 300,000 to Chief Executive Daniel Bradbury, allowing them buy shares at $16.02 each, 27.2 percent below the Bristol-Myers offer.

Icahn said Amylin has told brokers it plans to hold its annual meeting on May 11, but has not formally announced a date.

He separately said he will file another lawsuit if Amylin does not provide by Wednesday copies of books and records that he has demanded.

In afternoon trading, Amylin shares were down 43 cents, or 1.8 percent, at $23.69 on Nasdaq.

The case is Icahn Partners LP et al v. Amylin Pharmaceuticals Inc et al, Delaware Chancery Court, No. 7404.

(Reporting by Jonathan Stempel in New York; Additional reporting by Paritosh Bansal in New York and Toni Clarke in Boston; Editing by Richard Chang, Lisa Von Ahn and Gunna Dickson)