A new royalty deal was the fuel that powered biotech PTC Therapeutics (PTCT -0.76%) stock to a 15% gain on Thursday. That arrangement, which covers PTC's spinal muscular atrophy (SMA) treatment Evrysdi, features a hefty upfront payment that could also bring in hundreds of millions of dollars in additional monies. 

PTC is getting $1 billion for extending its deal

Before market open that day, PTC announced that it agreed upon a royalty deal -- an extension of an existing arrangement with (appropriately) Royalty Pharma (RPRX). Under the new terms, Royalty is acquiring additional royalties on Evrysdi for a $1 billion upfront payment.

Additionally, PTC has the option to sell up to its maximum retained royalties on the drug for up to $500 million. As an alternative, it can choose to sell half of that take to Royalty Pharma for as much as $250 million.

For the biotech company's investors, this is a very pleasant enhancement to the existing strategic partnership. This deal was originally signed in 2020, and under its terms, Royalty Pharma was on the hook for $650 million in return for roughly 43% of Evrysdi's royalties.

In its press release trumpeting the modified arrangement, PTC said it will use the incoming proceeds to retire debt and for the funding of its operations.

A powerful new funding source

PTC management is clearly enthusiastic about the latest deal, as well as it should be given the dollar figures baked into it. The company quoted CEO Matthew Klein as saying that the arrangement will give it the financial power "to support operations and [allow] for increased operational and financial flexibility."