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Stock-Based Compensation
 12 Months Ended
Dec. 31, 2023
Share-Based Payment Arrangement [Abstract]  
Stock-Based Compensation
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 11, 2023. The 2019 Incentive Plan replaced the Insmed Incorporated 2019 Incentive Plan, as amended (the Old 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. On May 16, 2019, upon the approval of the Old 2019 Incentive Plan by shareholders, 3,500,000 shares were authorized for issuance thereunder, plus any shares subject to then-outstanding awards under the Company's 2017 Incentive Plan, the 2015 Incentive Plan and the 2013 Incentive Plan that subsequently were canceled, terminated unearned, expired, were forfeited, lapsed for any reason or were settled in cash without the delivery of shares. On May 12, 2020, at the Company's 2020 Annual Meeting of Shareholders, the Company's shareholders approved an amendment of the Old 2019 Incentive Plan providing for the issuance of an additional 4,500,000 shares under the plan. On May 12, 2021, at the Company's 2021 Annual Meeting of Shareholders, the Company's shareholders approved the second amendment to the Old 2019 Incentive Plan providing for the issuance of an additional 2,750,000 shares under the plan. On May 11, 2022, at the Company's 2022 Annual Meeting of Shareholders, the Company's shareholders approved the third amendment to the Old 2019 Incentive Plan, providing for the issuance of an additional 3,000,000 shares under the plan. At the May 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. As of December 31, 2023, 7,180,171 shares remained for future issuance under the 2019 Incentive Plan. The 2019 Incentive Plan will terminate on May 16, 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 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. During the twelve months ended December 31, 2023 and 2022, the Company granted inducement stock options covering 2,674,290 and 1,068,310 shares, respectively, of the Company's common stock to new employees.
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, 2023, 2022 and 2021.
202320222021
Volatility
62% - 70%
69% - 70%
70% - 71%
Risk-free interest rate
3.36% - 4.72%
1.37% - 4.27%
0.36% - 1.20%
Dividend yield0.0%0.0%0.0%
Expected option term (in years)6.055.935.84
Weighted average fair value of stock options granted$13.12$13.19$18.50
For the years ended December 31, 2023, 2022 and 2021, 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, 2023 and December 31, 2022, the Company had performance-conditioned options covering 114,780 shares outstanding. As of December 31, 2023 and December 31, 2022, 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 years ended December 31, 2023, 2022 and 2021 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, 202012,263,402 $18.84 
Granted4,039,360 $30.18 
Exercised(1,235,186)$15.50 
Forfeited and expired(978,616)$24.35 
Options outstanding at December 31, 202114,088,960 $22.00 
Exercisable at December 31, 20217,292,851 $17.97 
Granted5,614,220 $20.89 
Exercised(1,151,341)$14.41 
Forfeited and expired(1,026,543)$25.70 
Options outstanding at December 31, 202217,525,296 $21.93 
Exercisable at December 31, 20228,587,820 $20.35 
Granted6,650,880 $20.20 
Exercised(871,933)$16.03 
Forfeited and expired(791,674)$24.01 
Options outstanding at December 31, 202322,512,569 $21.58 7.08$216,537 
Exercisable at December 31, 202311,125,232 $21.41 5.42$109,109 
The total intrinsic value of stock options exercised during the years ended December 31, 2023, 2022 and 2021 was $6.0 million, $11.1 million and $22.1 million, respectively.
As of December 31, 2023, there was $130.3 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of 2.7 years.
Restricted Stock and Restricted Stock Units—The Company may grant RS and RSUs to employees and non-employee directors. Each share of RS vests upon and 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.
RS and 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 these RS and RSUs on a straight-line basis over the requisite service period of these awards.
The following table summarizes RSU awards granted during the years ended December 31, 2023, 2022 and 2021:
 
Number of
RSUs
Weighted
Average
Grant Price
Outstanding at December 31, 2020844,391 $25.43 
Granted607,578 $29.40 
Released(291,823)$25.93 
Forfeited(140,432)$27.73 
Outstanding at December 31, 20211,019,714 $27.33 
Granted1,021,219 $20.34 
Released(417,894)$26.79 
Forfeited(103,139)$24.04 
Outstanding at December 31, 20221,519,900 $23.00 
Granted1,934,822 $19.26 
Released(574,219)$22.89 
Forfeited(130,209)$20.87 
Outstanding at December 31, 20232,750,294 $20.50 
As of December 31, 2023, there was $40.7 million of unrecognized compensation expense related to unvested awards, which is expected to be recognized over a weighted average period of 2.7 years.
Performance Stock Units — In January 2022, the Company issued 271,612 PSUs. For these PSUs, there are two performance conditions, a service condition, and a market condition. The performance conditions are the issuance of a press release announcing certain top-line results from a clinical trial and the acceptance of an NDA by the FDA for brensocatib. The service condition is continuous employment with the Company through the later of the third anniversary of the grant date of the PSU award and the date an NDA for brensocatib is accepted by the FDA. The potential payout of the awards ranges from 0% to 250% of the target, dependent on a market condition that is based on the Company's total shareholder return compared to a defined peer group. Due to the multiple vesting conditions, uncertain timing and variable payout of these PSUs, a Monte Carlo simulation was performed to determine the fair value of the awards. Compensation cost will be recognized on the date the performance conditions become 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 unamortized fair value of the awards will then be expensed prospectively on a straight-line basis over the remaining service period. Since the market condition is reflected in the grant-date fair value and is not a condition for the award to vest, it does not impact the requisite service period. The volatility, risk-free interest rate and weighted-average grant date fair value of the PSUs granted are 65.4%, 1.03% and $39.12, respectively. Any forfeitures 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, 2023, there were 266,550 PSUs outstanding with an unrecognized compensation expense of $10.4 million, which assumes a payout of 100% of the target.
The following table summarizes the aggregate stock-based compensation expense recorded in the consolidated statements of comprehensive loss related to stock options, RSUs and ESPP during the years ended December 31, 2023, 2022 and 2021 (in millions):
Years Ended December 31,
 202320222021
Research and development expenses$35.9 $26.4 $17.8 
Selling, general and administrative expenses38.9 31.3 28.2 
  Total stock-based compensation expense$74.8 $57.7 $46.0 
There was no stock-based compensation expense recorded in the consolidated statements of comprehensive loss related to PSUs during the year ended December 31, 2023, as the performance conditions associated with the PSU awards were not probable as of December 31, 2023.
Employee Stock Purchase Plan - On May 15, 2018, the Company's shareholders approved the Company’s 2018 Employee Stock Purchase Plan (ESPP). As part of the ESPP, eligible employees may acquire an ownership interest in the Company by purchasing common stock, at a discount, through payroll deductions. The ESPP is compensatory under GAAP and the Company recorded stock-based compensation expense of $1.9 million, $1.3 million and $1.3 million for the years ended December 31, 2023, 2022 and 2021, respectively