Greetings, and welcome to Mauna Kea's full year results 2020 and 2021 quarter one sales conference call. At this time, all participants are in a listen-only mode. A brief Q&A session will follow the formal presentation. Please note that this conference call is being recorded and that the recording will be available on the company's website for replay shortly. It is now my pleasure to introduce your host, Mr. Robert L. Gershon, CEO of Mauna Kea Technologies. Please go ahead, sir.
Thank you, Maren, and welcome everyone to Mauna Kea's H2 and full year of 2020 financial results and Q1 2021 sales results conference call. I'm joined on the call today by Christophe Lamboeuf, our Chief Financial Officer. Let me start with a brief introduction of what we will cover during our prepared remarks. I will start with a brief summary of our sales performance for the H2 of 2020. I will then discuss our sales results for the Q1 of 2021. I'll also provide a brief review of our recent highlights for the H2 of 2020 and Q 2021 periods. After these opening remarks, Christophe will provide you with a detailed review of our financial results for the 2020 H2 and full year, as well as the significant balance sheet enhancement activity that we announced earlier today.
I will provide an update on our progress with the formal evaluation to identify new clinical indications for commercial focus, which was one of our three strategic priorities in 2020. Finally, I'll share some closing remarks, including a brief summary of the key growth drivers and assumptions supporting the revenue outlook for 2021, which we introduced in this afternoon's press release. We will open the call to your questions. As reported on January 21st, our total sales for the H2 of 2020 increased 27% year-over-year to EUR 4.4 million. H2 of 2020 sales results were driven by 113% increase in system sales and a 15% increase in service revenue, which partially offset a 10% decline in sales of consumables compared to the prior year period. We are encouraged by the continued improvement in business trends in each of our primary markets around the world.
Though understandably, there is varying degrees of recovery depending upon the market. Specifically, the recovery in China has been faster than what we have seen in other primary markets. Procedure trends are running in excess of 90% of their pre-COVID-19 levels. System sales in the APAC region increased 21% over the H2 of 2020, and we expect continued improvement in business trends in China to result in improving capital equipment demand as we move through 2021. The U.S. recovery has been encouraging overall, albeit not entirely broad-based yet, as we are seeing pockets of strength and softer trends depending upon the region of the U.S. in question. That said, our U.S. business trends have shown progressive improvement since May of last year, and we reported high single-digit growth in procedures over the H2 of 2020.
Importantly, Q4 procedure trends showed marked improvement over the first two months of Q4, increasing in the low double digits year-over-year before slowing in December as U.S. elective procedures were impacted by the rise in COVID-19 cases. The pace of recovery in our EMEA and rest of world regions has been slower than in APAC and the U.S., although again, the trends have varied depending on country. Within EMEA specifically, we are seeing modest improvement in procedure trends in our commercial accounts, while the recovery in business trends in our academic and research-focused accounts has been much slower. Overall, while sales of consumables to consumers in the EMEA and rest of world regions declined 25% over the H2 of 2020, we did see a material improvement in demand trends in the Q4 compared to the Q3 , which is encouraging.
While procedure and adoption trends in our primary commercial markets around the world were significantly impacted by the global crisis caused by COVID-19 in the H1 of 2020, we have experienced a significant improvement in the business environment over the H2 of 2020, with particular strength demonstrated in the Q4 . We delivered Q4 sales growth of 41% year-over-year. The 41% growth was broad-based, with sales to U.S. customers increasing 44% year-over-year and sales to OUS customers increasing 37% year-over-year in Q4. We believe our Q4 performance reflects strong execution of our strategy, continued improvement in our underlying business and procedure trends, and measured improvement in the global capital equipment environment.
Importantly, we also delivered strong financial results over the H2 of 2020. We reduced our operating loss by 11% year-over-year, driven by solid management of operating expenses, which declined 3% year-over-year. Turning to a review of our Q1 sales results, which we announced in our press release today. Total sales for the Q1 of 2021 were EUR 1.6 million, up 7% year-over-year. Q1 sales results were driven by a 14% increase in sales of consumables and an 8% increase in service sales, partially offset by a 2% decrease in system sales compared to the prior year period.
The change in total sales for the Q1 of 2021 by geographic region was driven primarily by a 188% increase in sales to customers in the EMEA and rest of world regions, offset partially by lower sales to customers in the U.S. and APAC regions, which decreased 22% and 6% respectively, year-over-year. The operating environment remained difficult in the Q1 as the slower procedure trends we experienced in December carried over into the Q1 . In the U.S., after a slow start to the quarter, we saw improving procedure trends in the last two months of the quarter. March trends were notably strong as cases increased more than 60% year-over-year, and our U.S. customers performed the largest number of cases in a month since the Q3 of 2019.
Consumable sales to our distribution partner in APAC declined in the high single digits in Q1. We remain encouraged by the underlying procedure trends in this region, which continue to drive solid consumable demand each year, albeit with variability in the timing of orders on a quarterly basis. We also reported the sale of four new systems to the APAC region in the Q1 , which supports our cautious optimism in the measured pace of recovery that we continue to expect in the APAC region as we move through 2021. Q1 sales results in EMEA and rest of world regions were stronger than expected, especially given the continued challenge related to COVID and the slower pace of recovery in these regions. Consumable sales were driven by demand from existing customers using Cellvizio in the area of IBS and pancreatic cyst.
We also had a capital sale in the period compared to no system revenue in the prior year period. While we are pleased with the six system sales to customers in OUS markets in Q1, the 63% increase in total Cellvizio system shipments was driven by strong system placement results in the U.S. in Q1. Specifically, we delivered seven new system placements to U.S. customers, driven by the company's new targeted strategy in the U.S. GI market, which is focused on high-volume upper GI clinicians. Turning to a review of our recent operating progress and milestones. With respect to our growing body of clinical validation for Cellvizio, we announced four noteworthy publications in recent months.
In November, we announced the publication of a peer-reviewed meta-analysis of an international Delphi consensus report based on a systematic evidence-based review of endoscopic ultrasound, EUS, guided needle-based confocal laser endomicroscopy for pancreatic cyst lesion evaluation, or PCL. The meta-analysis was published in the European Journal of Gastroenterology & Hepatology and concluded that confocal laser endomicroscopy clearly outperformed endoscopic ultrasound fine needle aspiration, or EUS-FNA for short, in terms of diagnostic accuracy and supports the use of needle-based confocal laser endomicroscopy as a safe and effective tool in the diagnostic algorithm of pancreatic cysts. The consensus report was published in a peer-reviewed journal, Endoscopy International Open, and reflected a high level of agreement pertaining to the expert consensus statements and established that EUS-guided nCLE is a minimally invasive procedure that improves the evaluation of PCLs and should be systematically considered when EUS-FNA is indicated for PCL evaluation.
The consensus report also concluded that the use of nCLE as an adjunct to the standard EUS-FNA could positively impact patient management and improve healthcare resource utilization by reducing the number of misdiagnoses and preventing redundant follow-up investigations and unnecessary surgery. Clearly, we are pleased with the findings of these publications as they provide further support that Cellvizio plays a key role in the evaluation of pancreatic cysts. Can significantly improve the speed and accuracy of reaching a conclusive diagnosis. We expect to leverage this growing body of evidence in our discussions with hospitals to help them appreciate the benefits to patients of incorporating Cellvizio when performing endoscopic evaluation of pancreatic cysts. With more than 75,000 procedures each year in the U.S. alone, we believe this represents a compelling annual addressable opportunity for Cellvizio going forward.
In February, we announced two publications that further validate the value of our technology in the field of pancreatic cyst diagnosis, and importantly, risk stratification. The first study was published in a peer-reviewed journal, Gastrointestinal Endoscopy, reporting the successful development and application of artificial intelligence algorithms for nCLE diagnosis and risk stratification of intraductal papillary mucinous neoplasms or IPMNs. The authors demonstrated that deep learning models derived from nCLE images were more accurate in diagnosing and risk stratifying advanced neoplasia in IPMNs, compared with the current standard diagnosis and society guidelines. The second study was published in the Journal of Clinical Gastroenterology and concluded that nCLE appears to be an effective and safe technique for the diagnostic evaluation of PCLs. Indeed, nCLE was associated with a sensitivity of 85%, a specificity of 99%, a diagnostic accuracy of 99%, and post-procedure pancreatitis rate of just 1%.
We believe Cellvizio, combined with artificial intelligence, holds tremendous potential to improve patient management, thanks to its ability to accurately classify and stratify patients with pancreatic cystic lesions. We also made an exciting announcement in December, specifically an exclusive scientific and clinical research collaboration with Telix Pharmaceuticals Limited. The Telix and Mauna Kea scientific and clinical research collaboration is called the Imaging and Robotics in Surgery Alliance, or IRiS Alliance, and was created to further develop the combined technological capabilities of both companies. The IRiS Alliance was formed based on the belief that the use of cancer-specific positron emission tomography or PET imaging agents, including dual modality tracers that combine PET and fluorescent or optical techniques in conjunction with confocal laser endomicroscopy may significantly improve surgical and clinical outcomes in patients with urologic cancers.
The IRiS Alliance endeavors to combine the strengths of Telix's molecular targeting together with Cellvizio's real-time in vivo cellular imaging to bring dual modality molecular imaging to the operating theater for the first time. The IRiS Alliance aims to significantly transform the urologic surgeon or urologist, the way they will evaluate, target, excise, and confirm surgical margins at the cellular level. Our collaboration will further empower surgeons to fight cancers and save lives. We expect to begin preclinical and clinical feasibility studies in 2021. We had two notable changes in our leadership team in recent months, one at the board level and one on our management team. In December, we welcomed Ms. Jacquelien Ten Dam as an independent director. Ms. Ten Dam replaces Dr. Jennifer Tseng, who tendered her resignation from the board after three years of service.
Jacquelien Ten Dam currently serves as the chief financial officer of Mimetas, a biotech company based in the Netherlands. Jacquelien Ten Dam brings more than a decade of experience advising, financing, and leading innovative European healthcare firms. Jacquelien Ten Dam's expertise will be important as the company accelerates the commercialization of the Cellvizio platform and executes on its strategic roadmap. In late March, we welcomed a new Director of R&D, Fred Banégas.
Fred brings to Mauna Kea deep medical device expertise and an established track record in launching platform technologies with a specific focus in image diagnostics, robotics, artificial intelligence, digital health, and cancer treatment. Fred co-founded Intrasense, a public medical device company specializing in imaging diagnostics, and most recently was the R&D director at Quantum Surgical, which has a surgical robotic platform for cancer. With that, let me turn the call over to Christophe for a detailed review of our financial results. Christophe?
Thanks, Rob. Given Rob's discussion on our sales results, along with the detailed disclosure in our Q4 and full year 2020 sales press release on January 21st, 2021. My commentary today will focus on our full financial results, with some specific commentary on H2 of 2020. Total revenue for the H2 of 2020 increased EUR 0.8 million, or 20% year-over-year, to EUR 4.8 million, compared to EUR 4 million last year. Total operating expenses for the H2 2020 period decreased EUR 0.3 million or 3% year-over-year to EUR 9.1 million compared to EUR 9.3 million in the H2 of 2019. Result, operating loss for the H2 of 2020 period decreased by 11% year-over-year, and the net loss decreased by 15% year-over-year. Turning now to a review of our financial results for the full year 2020 period.
As detailed in our press release this afternoon, total revenue decreased EUR 0.6 million or 7% year over year to EUR 7.9 million. Additionally, as noted in our earnings press release this afternoon, the income statement at December 31st, 2019, has been restated to take into account a change in the presentation of the amortization of systems made available to customers under pay-per-use contract in the U.S. EUR 0.3 million of amortization are now included in cost of goods sold, compared to sales and marketing previously. As of December 31st, 2020, this amortization was EUR 0.3 million and are reported in cost of goods sold. Gross profit for the full year 2020 decreased EUR 0.5 million or 10% year over year to EUR 4.4 million compared to EUR 4.9 million in 2019. Gross margin for the full year 2020 period was 67.1%, compared to 65.6% in 2019.
Total operating expenses for the full year 2020 period decreased EUR 1.2 million or 6% year-over-year to EUR 17.8 million, compared to EUR 19 million for the full year 2019 period. The decrease in total operating expenses was primarily driven by a EUR 0.6 million decrease in sales and marketing expenses, a EUR 0.4 million decrease in administration expenses, and a EUR 0.3 million decrease in share-based payments, offset partially by a EUR 0.1 million increase in research and development expenses compared to 2019.
Current operating loss for the full year 2020 period was EUR 12 million compared to an operating loss of EUR 13 million for the full year 2019 period. The decrease in operating loss was driven by the EUR 0.5 million decrease in gross profit, offset by the EUR 1.2 million decrease in total operating expenses and by the EUR 0.3 million increase in other income compared to the prior year period.
Net loss for the full year 2020 period was EUR 12.8 million compared to a net loss of EUR 15.3 million for the full year 2019 period. The decrease in net loss was primarily driven by the decrease in operating loss, as well as a EUR 1.4 million decrease in interest and other expenses compared to the prior year period. Turning to a review of the balance sheet. As of December 31st, 2020, the company had a cash balance of EUR 8.6 million and total long-term debt obligations of EUR 26.2 million, compared to EUR 10 million of cash and EUR 15.5 million of total long-term debt obligation as of December 31st, 2019.
The change in cash during the 12 months ending December 31st, 2020, was driven by EUR 8 million of cash used in operating activities, EUR 1 million of cash used in investing activities, offset partially by a EUR 7.7 million of cash from financing activities.
Earlier today, we announced the establishment of an equity financing facility with Kepler Cheuvreux. In accordance with the terms of this agreement, Kepler Cheuvreux has undertaken to subscribe for a maximum of 6 million shares at its own initiative over a maximum period of 24 months, subject to the contractual conditions being met. As of December 31st, 2020, the company had EUR 8.6 million cash available, which, given its sales prospect and the various sources of financing, repayable advance, research tax credit, will enable it to meet its deadline until August 31st, 2021. With the implementation of this financing, the facility offers an indicative amount of EUR 9.3 million of net proceeds based on the most recent closing stock prices.
Together, this new transaction, along with strong expense management and the EUR 8.6 million of cash on our balance sheet at year-end, provides sufficient liquidity to manage the business through the Q2 of 2022. With that, I'll turn the call back to Rob. Rob?
Thanks, Christophe. Turning to an update on the progress with the formal evaluation process to identify new clinical indications for commercial focus, which is one of our key strategic priorities. As discussed on our recent calls, we are currently undertaking a formal process to evaluate new clinical indications to identify the company's next area of commercial focus. To the extent this process is successful, we believe it will result in us uncovering the next application for commercial focus that will serve as the future growth engine of the company. In March of 2019, we identified interventional pulmonology as the first potential new clinical application that we put through this process. As a reminder, the primary goal of the formal process is to evaluate the commercial opportunity interventional pulmonology presents in terms of market potential, clinical value, product feasibility, and overall strategic value for our company.
As we've moved through each stage of this formal evaluation, we have been increasingly encouraged by the potential opportunity in the interventional pulmonology market, given the very high incidence rate of lung cancer, the highest mortality rate among all cancer types, and the fact that we have a unique solution to help improve the current lung biopsy standard of care. The development of Cellvizio's needle-based probe, AQ-Flex 19, allows the physician to penetrate and visualize inside the nodule or lesion in real time and in vivo. We also believe that AQ-Flex 19 could improve the diagnostic yield and reduce the need for unnecessary invasive procedures for diagnosing or staging lung cancer.
We continue to believe one of the most compelling aspects of the interventional pulmonology market for Mauna Kea is that Cellvizio, when used in combination with robotic and advanced navigational platforms, has the promise of improved targeting in situ tissue characterization and increased diagnostic yield. To that end, in December of 2019, we announced a collaboration with the Lung Cancer Initiative at Johnson & Johnson, which is working to develop new diagnostic and therapeutic approaches for this disease with significant unmet need. This is an exciting collaboration for Mauna Kea. We have made significant progress in 2020, including the pilot clinical study that we initiated last summer.
Enrollment of this first in-human study combining nCLE and robotic navigational bronchoscopy at Fox Chase Cancer Center in Philadelphia using both Cellvizio and J&J's MONARCH platform from Auris Health for the diagnosis of peripheral lung nodules is anticipated to be completed during the H1 of 2021. We look forward to expanding our collaboration activities with J&J, and we'll share updates as appropriate as we move through 2021. We are proud of the progress we have made since we started the formal evaluation of interventional pulmonology, not the least of which is the collaboration with J&J's LCI team on the potential application for our technology in the endoluminal robotic space. As discussed on our previous earnings calls, the strategic evaluation is not limited to our efforts in the endoluminal robotic space.
In fact, we continue to evaluate multiple other interesting new clinical applications within interventional pulmonology for Cellvizio that we are taking through the formal evaluation process, and we look forward to updating investors as these efforts progress as we move through 2021. In closing, we remain confident that our commercial strategy is well-founded, and our results in recent quarters continue to reflect that our new targeting strategy in the U.S. GI market focused on high-volume upper GI clinicians is working. We are driving adoption of Cellvizio in this targeted group, and importantly, we are seeing higher utilization per system from these new customers as their upper GI procedures represent a high percentage of their total procedure mix. We expect strong execution of this strategy in 2021 to result in the U.S. region representing the largest contributor to total company sales growth year-over-year.
Outside of the U.S., we will continue to focus on leveraging our strong distribution relationships and our KOL support in EMEA and certain APAC markets. Assuming the global capital equipment recovery continues to progress as we move through 2021, we expect to drive total sales growth in the range of 25%-30% year-over-year in 2021. We also expect to invest strategically while still leveraging our operating expenses this year. With that, Maren, we will now open the call for questions.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press zero one on your telephone keypad. Thank you for holding until the first question arrives. Ladies and gentlemen, let me remind you that if you wish to ask a question, please press zero one on your telephone keypad. Yes. We have a first question from Sébastien Malafosse from ODDO BHF. Sir, please go ahead.
Hi, gentlemen. Thank you for taking my question and thank you for your presentation. Can you maybe elaborate a little bit on how you see the dynamic in 2021, especially in the U.S., considering that the year is off to a modest start? Can you please come back on the reason why? Maybe because of the pandemic, obviously. Can you maybe give us a bit more details on how you see the dynamic going forward in the U.S. market to reach your expectations for this year, which seem pretty strong?
Yes. Thanks, Sébastien, for your question. The dynamics in the market. Certainly, we are impacted by COVID-19. As I indicated in the prepared remarks, COVID-19 impacted cases at the end of Q4 in December and carried over to January and February of Q1. We saw a marked improvement in March of 2021, where case volumes, Cellvizio case volumes, increased over 60%. That was a very encouraging trend and correlated directly with the impact of COVID-19. It's important to note that in Q1 in the U.S., we were able to place seven systems in Q1 to our targeted group of Cellvizio potential customers. These are the high-volume upper GI physicians that generate a high volume of Cellvizio procedures.
We're quite encouraged that we were able to secure seven of those in the Q1 of the year as compared to, I believe the number was 13 in the whole H2 of last year. I might have that slightly off. Christophe can correct me. We were quite pleased with that. It is the trends that we're seeing in utilization of our existing customers, coupled with the new customers that are being onboarded and those that are in the pipeline, that give us a high level of confidence and conviction in the way in which the rest of the year will unfold. Just to further elaborate on the dynamics in the marketplace. In the U.S., we see that cases for our established base of customers are still operating at about the 70%-75% volume rate compared to the pre-COVID numbers.
COVID is still impacting it to that degree. In the other markets around the world, APAC, as I indicated in the prepared remarks, remains at pretty close to their pre-COVID numbers. That's very encouraging. In Europe, in EMEA, we're seeing that pre-COVID level volumes remain at about 50% right now. We're certainly encouraged by the performance of Q1. All three regions will be contributing to the growth projections that we shared with you. With the U.S. leading that growth, and specifically, U.S. consumables will lead that growth as we continue to drive adoption of high-volume users.
Okay. Thank you. Very useful. Thank you very much.
You're welcome. Thanks, Sébastien.
Thank you. Next question from Kieron Banerjee from Gerson Partners. Sir, please go ahead.
Hi, gentlemen. Good evening and thank you for taking my questions. Just I think three from my side quickly. I think Sébastien may have just touched on it briefly there, but in terms of your sort of positive outlook for 2021, I'm sorry if I missed it in the main remarks, but I just wanted to understand sort of where you're taking those numbers from. I think it's 20%-30% growth. Is that sort of derived from Q1 and extrapolating or otherwise? Secondly, on the balance sheet in terms of the new facility with Kepler, would that therefore mean that you wouldn't be expected to draw down, I think, on a third tranche of the EIB loan as well? Finally, one quick point on the operational expenditure. I think you mentioned sales and marketing was a significant driver of the decrease.
Would that be expected to return this year with sort of a return to normality, in inverted commas, if that is possible at all? Thank you.
Sure. Okay. Thank you for your question. I'll take them in order, and I'll have Christophe answer the second and third. Starting with the first, in terms of the positive outlook in 2021 and where that growth is being derived from, and whether or not that's being extrapolated from Q1. The growth is very much being driven by the successful execution of our strategies around the world, and especially in the U.S. As we've discussed on previous calls, we implemented a strategy, a very focused, targeted strategy, on high-volume upper GI physicians in the U.S. It is that strategy that in large part drove the growth that we experienced in the back half of 2020, especially in the Q4 of 2020, and continues to fuel the growth that we're experiencing in Q1, and especially in the last month of Q1.
Just as I indicated just a few moments ago, Q1 was off to a slow start, which started in December. That continued in January, started to improve materially in February, and then we had the 60% growth in March, and March being our largest month of utilization for quite some time. As we look out for the balance of the year, it is really based upon the execution of that strategy, coupled with our distributor partner in China and our efforts in EMEA and rest of world, and our pipeline of activities in all three regions. It's important to note that the U.S. region is the region that we have made the largest amount of investment and have the highest expectations.
As such, we are expecting that the growth is going to be largely fueled by the U.S. region and specifically fueled by the growth in adoption of the technology. That is the recurring revenue that comes from consumables. You could expect U.S. consumables to be the largest contributor to growth. With that, I'll turn it to Christophe to talk about the balance sheet.
Yes. On the balance sheet, I think the question was on tranche three of the EIB loan that we contracted two years ago now. Yes, of course, there is a third tranche, which is subject to certain conditions. Down the road, of course, we're still thinking of drawing this tranche as soon as the other conditions are met. The second question was on the operating expenses and the sales and marketing expenses in 2020. Just to mention that it's not only the sales and marketing expenses that decreased, but the G&A as well. As far as we are planning, we expect to grow 25% - 30% in 2021. We also expect OpEx to increase as we invest in business growth.
Perfect. Thank you very much.
Thank you. We have no more questions.
Okay. If there are no more questions, we want to thank everyone for joining the call. As always, we want to thank our Mauna Kea Technologies committed employees that are doing a great job from an execution perspective. We just wish everyone a safe and good rest of the year. We look forward to our next update. Thank you very much.
Thank you.
Ladies and gentlemen, thank you all for your participation. You may now disconnect.