Sept. 3 (Bloomberg) -- Cephalon Inc. will end its co- promotion agreement with Takeda Pharmaceutical Co. in North America for the sleep-disorder drug Provigil, because net sales dropped to less than $850 million this year.

The action takes effect Nov. 1 and means 500 Takeda employees in the U.S. will no longer market the treatment, Cephalon said today in a regulatory filing. The original 2006 accord gave either company the option to pull out if net sales were lower than the $850 million threshold in the second year, Cephalon said.

Cephalon, of Frazer, Pennsylvania, said it will add 270 sales representatives early next year, through hiring and contract work. The U.S. company will have to make three years of ``sunset payments'' to Takeda, of Osaka, Japan, based on a percentage of royalties.

Sales of Provigil rose 9.6 percent in the second quarter to $234.8 million, after a 14 percent price increase in March, Cephalon reported in July. Cephalon, through legal settlements, has delayed generic competition for Provigil until 2012. The company says it plans to introduce a successor drug, Nuvigil, in the second half of next year.

Cephalon fell 79 cents, or 1 percent, to $74.50 at 4 p.m. New York time in Nasdaq Stock Market composite trading.

To contact the reporter on this story: Robert Greene in Washington at rgreene2@bloomberg.net.

Last Updated: September 3, 2008 16:06 EDT