What happened

Shares of Cara Therapeutics (CARA 13.68%) were soaring 13.1% higher as of 10:45 a.m. EDT on Tuesday. The big gain came after S&P Global division S&P Dow Jones Indices announced that Cara will replace MTS Systems in the S&P SmallCap 600 index

So what

The nice jump for Cara today makes sense. S&P Dow Jones Indices' news means that any mutual funds or exchange-traded funds (ETFs) that track the S&P SmallCap 600 index will load up on shares of Cara Therapeutics. 

Scientist holding two test tubes

Image source: Getty Images.

However, the boost from being added to this index will only be a temporary one. After the funds have bought shares of Cara, the biotech's fortunes will depend on what happens with its business.

There's reason to be optimistic on that front. Cara and its partner Vifor Pharma announced on March 8 that the U.S. Food and Drug Administration (FDA) accepted the New Drug Application (NDA) for Korsuva injection in treating moderate to severe pruritis (itching) in hemodialysis patients. The FDA also granted Priority Review to the NDA, which will shorten the review process.

Now what

The FDA should make its approval decision for Korsuva by Aug. 23. That's not the only potential catalyst for Cara on the way, though. The company expects to report top-line data from its phase 2 study of an oral version of Korsuva in treating atopic dermatitis within the next couple of months.