INSMED IncINSM
INSMED Inc Stock Compensation Disclosure
13. Stock-Based Compensation
The Company's current equity compensation plan, the Insmed Incorporated Amended and Restated 2019 Incentive Plan (the 2019 Incentive Plan), was approved by shareholders at the Company's Annual Meeting of Shareholders on May 13, 2023. The 2019 Incentive Plan replaced the Insmed Incorporated 2019 Incentive Plan, as amended, pursuant to which the Company was authorized to grant incentive awards up to an aggregate of 13,750,000 shares. At the Company’s 2023 Annual Meeting of Shareholders, in connection with approval of the 2019 Incentive Plan, the Company's shareholders approved the issuance of an additional 10,500,000 shares under the 2019 Incentive Plan. At the Company's 2024 Annual Meeting of Shareholders, the Company's shareholders approved Amendment No. 1 to the 2019 Incentive Plan, which provides for the issuance of an additional 3,000,000 shares under the plan. At the Company's 2025 Annual Meeting of Shareholders, the Company's shareholders approved Amendment No. 2 to the 2019 Incentive Plan, which provides for the issuance of an additional 10,000,000 shares under the 2019 Incentive Plan. As of December 31, 2025, 11,674,577 shares remain available for future issuance under the 2019 Incentive Plan.
The 2019 Incentive Plan is administered by the Compensation Committee of the Board of Directors of the Company. Under the terms of the 2019 Incentive Plan, the Company is authorized to grant a variety of incentive awards based on its common stock, including stock options (both incentive stock options and non-qualified stock options), RSUs, performance options/shares and other stock awards to eligible employees and non-employee directors. The 2019 Incentive Plan will terminate on April 3, 2029 unless it is extended or terminated earlier pursuant to its terms.
In addition, from time to time, the Company makes inducement grants of stock options and RSUs to new hires, which awards are made pursuant to the Nasdaq's inducement grant exception to the shareholder approval requirement for grants of equity compensation. The Company granted inducement stock options and RSUs covering 522,517, 1,444,850 and 2,674,290 shares of the Company's common stock to new employees during the years ended December 31, 2025, 2024 and 2023, respectively. In February 2025, the Company adopted the Insmed Incorporated 2025 Inducement Plan, under which the Company is authorized to grant a variety of inducement awards, including stock options and RSUs, up to an aggregate of 1,000,000 shares, as an inducement to become an employee of the Company or any of its subsidiaries. As of December 31, 2025, 700,233 shares remain available for future issuance under the Insmed Incorporated 2025 Inducement Plan.
On May 15, 2018, the 2018 Employee Stock Purchase Plan was approved by shareholders at the Company's 2018 Annual Meeting of Shareholders. The ESPP allows eligible employees to acquire an ownership interest in the Company by purchasing common stock, at a discount, through payroll deductions. As of December 31, 2025, 4,359,032 shares remain available for future issuance under the ESPP. The ESPP is compensatory under GAAP and the Company recorded stock-based compensation expense of $4.5 million, $3.3 million and $1.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Stock Options—The Company calculates the fair value of stock options granted using the Black-Scholes valuation model. The following table summarizes the grant date fair value and assumptions used in determining the fair value of all stock options granted, including grants of inducement options, during the years ended December 31, 2025, 2024 and 2023.
| 2025 | 2024 | 2023 | |||||||||||||||
| Volatility | 61% - 65% | 61% - 69% | 62% - 70% | ||||||||||||||
| Risk-free interest rate | 3.59% - 4.45% | 3.51% - 4.64% | 3.36% - 4.72% | ||||||||||||||
| Dividend yield | 0.0% | 0.0% | 0.0% | ||||||||||||||
| Expected option term (in years) | 5.89 | 6.11 | 6.05 | ||||||||||||||
| Weighted average fair value of stock options granted | $42.52 | $20.11 | $13.12 | ||||||||||||||
The volatility factor was based on the Company’s historical volatility during the expected option term. The Company accounts for forfeitures as they occur.
From time to time, the Company has granted performance-conditioned options to certain of its employees. Vesting of these options is subject to the Company achieving certain performance criteria established at the date of grant and the grantees fulfilling a service condition (continued employment). As of December 31, 2025 and December 31, 2024, the Company had performance-conditioned options covering 114,780 shares outstanding. As of December 31, 2025 and December 31, 2024, the performance conditions are not probable and therefore no stock-based compensation was recorded in the consolidated statements of comprehensive loss.
The following table summarizes stock option activity for stock options granted for the year ended December 31, 2025 as follows:
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life in Years | Aggregate Intrinsic Value (in '000) | ||||||||||||||||||||
| Options outstanding at December 31, 2024 | 21,927,128 | $ | 23.89 | ||||||||||||||||||||
| Granted | 1,361,710 | $ | 68.55 | ||||||||||||||||||||
| Exercised | (5,597,272) | $ | 22.20 | ||||||||||||||||||||
| Forfeited and expired | (315,985) | $ | 36.58 | ||||||||||||||||||||
| Options outstanding at December 31, 2025 | 17,375,581 | $ | 27.82 | 6.60 | $ | 2,540,642 | |||||||||||||||||
| Exercisable at December 31, 2025 | 9,976,481 | $ | 22.75 | 5.62 | $ | 1,509,208 | |||||||||||||||||
The total intrinsic value of stock options exercised during the years ended December 31, 2025, 2024 and 2023 was $534.9 million, $173.4 million and $6.0 million, respectively.
As of December 31, 2025, there was $132.3 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of 1.9 years.
Restricted Stock Units—The Company may grant RSUs to employees and non-employee directors. Each RSU represents a right to receive one share of the Company's common stock upon the completion of a specific period of continued service.
RSU awards granted are valued at the market price of the Company's common stock on the date of grant. The Company recognizes non-cash compensation expense for the fair values of RSUs on a straight-line basis over the requisite service period of the awards.
The following table summarizes RSU awards granted during the year ended December 31, 2025:
Number of RSUs | Weighted Average Grant Price | |||||||||||||
| Outstanding at December 31, 2024 | 3,320,341 | $ | 23.67 | |||||||||||
| Granted | 1,896,360 | $ | 72.62 | |||||||||||
| Released | (1,183,350) | $ | 23.59 | |||||||||||
| Forfeited | (144,121) | $ | 38.28 | |||||||||||
| Outstanding at December 31, 2025 | 3,889,230 | $ | 46.96 | |||||||||||
The total grant-date fair value of RSU awards vested during the years ended December 31, 2025, 2024 and 2023 was $27.9 million, $19.6 million, and $13.1 million, respectively.
As of December 31, 2025, there was $140.7 million of unrecognized compensation expense related to unvested awards, which is expected to be recognized over a weighted average period of 2.4 years.
Performance Stock Units—In December 2025, the Company granted 91,877 PSUs (the 2025 PSUs) to certain of its employees. The 2025 PSUs are subject to a performance condition and a service condition. The performance condition is the number of INDs cleared by the FDA through December 31, 2028. The service condition is continuous employment with the Company through February 1, 2029. The potential payout of the award ranges from 0% to 200% of the target, dependent on the number of INDs cleared through December 31, 2028. The Company will begin recognizing compensation cost on the date that performance condition becomes probable, with an initial recording of the cumulative expense that would have been recognized if the PSU expense had been recognized on a straight-line basis since the date of grant. The remaining unrecognized compensation cost will then be expensed prospectively on a straight-line basis over the remaining service period. Any forfeitures of unvested awards that occur after compensation cost recognition commences will result in the cumulative reversal of expense in the period in which the forfeiture occurs. As of December 31, 2025, no performance condition was probable and therefore no stock-based compensation was recorded in the consolidated statements of comprehensive loss. As of December 31, 2025, there was an unrecognized expense related to the 2025 PSUs of $18.1 million, which assumes a 100% payout.
In January 2022, the Company issued 271,612 PSUs (the 2022 PSUs). The 2022 PSUs were subject to two performance conditions based on brensocatib milestones, both of which had been achieved as of March 31, 2025, and a service condition, which was three years of continued employment. The Company achieved the first performance condition by issuing a press release announcing certain topline results from the ASPEN trial by June 30, 2024. The Company achieved the second performance condition in February 2025 upon the FDA's notification that the new drug application had been accepted for brensocatib. During the second quarter of 2024, the Company's total shareholder return was compared to the Company's Peer Group and the payout of the awards was determined to be 250% of the target. During the year ended December 31, 2025, 660,466 shares were issued upon vesting of the 2022 PSUs and $10.3 million of stock-based compensation expense was recognized.
The following table summarizes the aggregate stock-based compensation expense recorded in the consolidated statements of comprehensive loss related to stock options, RSUs, PSUs and ESPP during the years ended December 31, 2025, 2024 and 2023 (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Research and development expenses | $ | 70,046 | $ | 47,674 | $ | 35,880 | |||||||||||
| Selling, general and administrative expenses | 82,664 | 49,161 | 38,898 | ||||||||||||||
| Total stock-based compensation expense | $ | 152,710 | $ | 96,835 | $ | 74,778 | |||||||||||
There was no stock-based compensation expense recorded in the consolidated statements of comprehensive loss related to the 2022 PSUs during the years ended December 31, 2024 and 2023, as the performance conditions associated with the 2022 PSU awards were not probable as of these dates.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.