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The current body of evidence suggests that we could and did, since Neanderthal DNA is present in some modern humans [1].

[1] http://www.bbc.com/news/science-environment-33226416

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That suggests we did. It doesn't necessarily suggest we still could. Nicely illustrates why speciation is more complex than "can't interbreed" though.

I call them a Neanderthal "race' not species. Then it might be unclear how different they appear from modern man.

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