News Archive

Hess quarterly net income more than doubles on asset sales

(Reuters) – Oil and gas producer Hess Corp (HES.N) said on Wednesday its quarterly net income more than doubled due in part to gains from recent asset sales and a production jump in North Dakota’s Bakken shale formation.

The company posted net income of $1 billion, or $3.31 per share, compared with $420 million, or $1.23 per share, in the year-ago period.

Oil production jumped to an average of 380,000 barrels of oil equivalent per day (boe/d) from 310,000 boe/d in the year-ago quarter.

(Reporting by Ernest Scheyder Editing by W Simon)

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Facebook spending gets thumbs up from analysts

(Reuters) – Another day, another quarterly report from a technology company that disappointed investors.

Facebook Inc’s shares were set to open about 6 percent lower on Wednesday, a day after the company revealed aggressive spending plans for 2015.

But analysts were taking a more upbeat view, saying the heavy spending will drive long-term growth and reinforce the social networking giant’s market dominance.

No brokerages cut their recommendation on the company following the release of its third-quarter results, and several said the price decline represented a buying opportunity.

At least 12 brokerages cut their price targets on the stock, by as much as $8 to as low as $78, mainly to reflect the company’s expense and revenue outlook.

Facebook’s shares closed at $80.77 on Tuesday.

“FB delivered another strong quarter and is very well-positioned in an increasingly mobile and social internet landscape, and to be clear, FB is investing into strength and future growth opportunities,” JP Morgan Securities analysts said in a research note.

The brokerage rates Facebook “overweight”, with a price target of $85, down from $90.

Of 44 analysts covering the stock, 15 rate it a “strong buy,” 22 a “buy” and seven a “hold.” Nobody rates the stock a “sell”, according to Thomson Reuters data.

The drop in Facebook’s share price follows a now-familiar script this corporate reporting season.

Shares of Inc, eBay Inc, Google Inc and Netflix Inc also fell after the companies failed to live up to investor expectations.

In most cases, their shares have recovered.

“We have already seen relatively rapid share price recoveries post Q3 EPS corrections – AMZN up 4 percent, EBAY and GOOGL up 7 percent, NFLX up 16 percent – so this market is buying beaten-down Net stocks,” RBC Capital Markets analyst Mark Mahaney, who has an “outperform” rating on the stock, wrote in a note.

Facebook, which reported stronger-than-expected quarterly revenue, projected a 55-75 percent increase in spending in 2015 for investments that will eat into its near-term profit.

The company’s costs and expenses rose 32 percent in the first nine months of the year.

“Comparable investment of the scale that Facebook is contemplating can only be achieved by them or by Google… We see further investment reinforcing their relative dominance in digital advertising for years to come,” Pivotal Research analysts said in a report, maintaining a “buy” rating.

Facebook has spent billions of dollars to buy fast-growing companies such as WhatsApp, Instagram and Oculus as it tries to boost its reach, especially among the young.

Piper Jaffray’s Gene Munster, who has an “overweight” call on the stock, said that while spending would hurt earnings in the short term, Facebook’s broad product portfolio would start to benefit the business over the next six to eight quarters.

Up to Tuesday’s close, Facebook’s shares had risen almost 50 percent since the start of the year.

“While the shares aren’t exactly ‘for sale’ we are buyers of this dip,” RBC’s Mahaney said.

(Editing by Ted Kerr)

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At Brazil auto show, industry wonders if it can get any worse

SAO PAULO (Reuters) – Automakers in Brazil are facing the sharpest slowdown since 1999 and it could be a year or more before things turn the corner.

It is tough to find a sunny 2015 forecast at the Sao Paulo Auto Show this week, where companies accustomed to a market growing by double digits are now considering three straight years of declining sales.

“It looks like the market is in for a difficult time until 2016,” said Koji Kondo, Toyota Motor Corp’s (7203.T) chief executive in Brazil, citing labor costs, rising taxes and infrastructure bottlenecks as a persistent problem. “It’s hard for Brazil’s economic conditions to recover in the short term.”

Sales of cars and light trucks have fallen 9 percent so far this year compared to the first nine months of 2013, as demand dries up due to tighter credit and shaky consumer confidence. Local units of global carmakers have gone from cash cows to serious headaches, with new factories creating a glut of inventory.

Brazil’s slump combined with an erratic Argentine economy could leave as much as 50 percent of the industry’s capacity in South America unused next year, said Rogelio Goldfarb, Ford Motor Co’s (F.N) head of corporate affairs in the region.

The auto industry, which contributes a quarter of Brazil’s industrial production, has become emblematic of the troubles facing re-elected President Dilma Rousseff in her new term.

The country’s car market was still booming when Rousseff took office in 2011, doubling in a decade to become the world’s fourth largest. But soaring costs and more competitive imports meant trouble for local auto factories and other manufacturers.

Rousseff’s reaction was a series of targeted tax breaks, import barriers and credit subsidies for carmakers and other favored industries. The measures boosted sales temporarily but did little for Brazil’s competitiveness. Now it is proving tough to wean companies off what were meant as emergency measures.

Executives at the car show on Tuesday argued for yet another extension of an industrial tax break meant to last three months in 2012, which has since drained billions from a strained federal budget. A plan to finish phasing out the so-called IPI tax break was last postponed to the end of December.

“The current IPI is now part of the industry. Consumers are used to it. Whatever the changes, you can’t raise (the tax),” said Jaime Ardila, the head of General Motors Co (GM.N) in South America, who said he hopes for a slight sales rebound in 2015.

Losing the tax incentives would scrap a gentlemen’s agreement between the government and automakers, which have been trimming payrolls with furloughs and voluntary buyouts but promised to stop short of widespread layoffs for now.

Without the tax break next year, automakers from Ford to Nissan Motor Co (7201.T) forecast sales in line with 2014, which is likely to be the weakest volume in five years.

Others are only slightly more optimistic, such as Thomas Schmall, Volkswagen AG’s (VOWG_p.DE) chief executive in Brazil, who said the market could grow as much as 4 percent next year.

Other players, such as luxury brands or individual carmakers unveiling new models, are aiming for even healthier growth, but for now it looks like a zero-sum game.

“Most likely 2016 is when we expect the market will return to growth,” said Honda Motor Co’s (7267.T) chief executive for South America, Issao Mizoguchi. “2015 is the year to take some tough medicine … If things are stable, that would be good.”

(Editing by Todd Benson and Chizu Nomiyama)

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Facebook slide weighs on futures; Fed statement eyed

NEW YORK (Reuters) – U.S. stock index futures were mixed on Wednesday, with SP 500 and Nasdaq futures weighed by a sharp decline in Facebook shares, and ahead of a statement from the U.S. Federal Reserve as it winds down its stimulus program.

* In an otherwise data-light session, the Fed is likely to announce that it will no longer add to its holdings of Treasury bonds and mortgage-backed securities, effectively ending a program that at its peak pumped $85 billion a month into the financial system.

* The Fed’s cash injection is widely seen as a pillar of the current multiyear bull market in equities, and earnings are expected to support any further advances. So far this reporting season, 73.5 percent of SP 500 companies have exceeded profit expectations. In a typical quarter since 1994, 63 percent of companies beat estimates, according to Thomson Reuters data.

* Facebook Inc (FB.O) shares fell 6.5 percent in premarket trading the day after the social network announced an increase in spending in 2015 and projected a slowdown in revenue growth this quarter.

* Hershey Co (HSY.N) shares fell 4.7 percent after the chocolate maker cut its full-year earnings and revenue growth forecasts, citing higher dairy prices, a stronger dollar and weak sales growth in some markets.

* Shares of American Realty Capital (ARCP.O) slid 14 percent after it said some of its previous financial statements were unreliable.

* Orbital Sciences Corp (ORB.N) shares fell 14.4 percent a day after its unmanned rocket exploded seconds after liftoff from a commercial launch pad in Virginia, marking the first accident since NASA turned to private operators to deliver cargo to the International Space Station.

Futures snapshot at 8:17 EDT:

* SP 500 e-minis ESc1 were falling 2 points, or 0.1 percent, with 162,100 contracts changing hands.

* Nasdaq 100 e-minis NQc1 were down 7.5 points, or 0.18 percent, in volume of 29,675 contracts.

* Dow e-minis 1YMc1 were up 10 points, or 0.06 percent, with 20,000 contracts changing hands.

(Reporting by Rodrigo Campos; Editing by Lisa Von Ahn)

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Deutsche Bank slumps to quarterly net loss as legal costs weigh

FRANKFURT (Reuters) – Deutsche Bank AG (DBKGn.DE) fell to a net loss in the third quarter after falling victim to the legal costs which already this week prompted a management reshuffle designed to help tackle a long list of unresolved litigation issues.

Germany’s top lender has stumped up around 7 billion euros ($8.9 billion) in fines and charges since 2012, overshadowing management efforts to restructure and reform the bank and making its stock one of the worst performers in the European sector so far this year.

The bank, which in June raised 8.5 billion euros to strengthen its balance sheet, originally hoped to clear the decks of legal issues in 2014, but has postponed that target to 2015. “There continues to be significant uncertainty about the timing and size of potential impacts” of litigation, Chief Finance Officer Stefan Krause said.

Its shares fell 1.4 percent by 7.03 a.m. EDT on Wednesday, contributing to a 28 percent fall so far this year and placing the bank just a notch ahead of National Bank of Greece (NBGr.AT) in performance rankings in the STOXX Europe 600 index of European banks .SX7P.

Deutsche Bank also sounded a note of caution on some of its revised 2015 profit goals after spending 894 million euros on litigation in the quarter, saying conditions remained challenging in several areas including “transaction” banking, or the provision of money transfers, trade finance and treasury services to corporations.

Signaling it had not done enough to resolve a long list of lawsuits and investigations in areas such as the setting of benchmark interest rates, the bank had said on Tuesday it was reorganizing its management board and had created a new role focused on legal issues, to be taken by audit head Christian Sewing.

“We aim to resolve these (issues) as soon as possible,” co-Chief Executive Officer Anshu Jain said on a conference call.

Separately, Deutsche named Marcus Schenck, a London-based Goldman Sachs (GS.N) investment banker and former finance chief of German energy group E.ON (EONGn.DE), to replace CFO Krause, who will take on a new board seat in charge of strategy.


The bank is two years into a turnaround plan that has led to costs falling and operating profit rising, but the threat of further penalties from alleged misconduct has cast a shadow over its share price and management’s success claims.

Investigators are looking into possible attempts at interest-rate and forex-benchmark manipulation, high-frequency trading, possible violations of U.S. sanctions on Iran and other activities.

Deutsche fell to a quarterly net loss of 92 million euros from a 51 million profit in the year-earlier period, while net revenue increased a modest 2 percent.

Pretax profit rose 3.6 percent in Deutsche’s important investment banking division, boosted by a 15 percent jump in revenue derived from trading debt and foreign exchange.

But that trading jump lagged a 24 percent rise seen by U.S. rivals such as Citibank (C.N) and JP Morgan (JPM.N), according to Reuters calculations.

“Other banks took better advantage of market opportunities in this quarter than Deutsche Bank,” said analyst Guido Hoymann at brokerage Metzler Securities.

(Additional reporting by Clare Hutchison; Editing by David Holmes)

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Behind the scenes of Sanofi’s boardroom bust up

PARIS (Reuters) – A boardroom tussle brewing for months at Sanofi came to a head on Wednesday when France’s top drugmaker fired its chief executive, wiping more billions off its share price.

While the showdown played out in leaks to national newspapers has stunned investors as a “how not to do it” guide to corporate governance, the writing was on the wall in the deteriorating relationship between Chairman Serge Weinberg and CEO Chris Viehbacher.

The decision, which will see Weinberg take the helm until a new CEO is found, follows a dramatic few days during which Viehbacher had to present quarterly results without being able to reassure investors of his board’s support.

Instead, German-Canadian Viehbacher told Reuters on Tuesday that Weinberg had declined to clarify his future at a meeting the previous day, confirming reports of increasingly frosty relations between the CEO and the rest of the board.

On Wednesday, Sanofi said a special board meeting had decided unanimously to remove Viehbacher, its CEO of six years. Weinberg, a former top civil servant and a pillar of the French business establishment, said there had been no clash over strategy, but rather blamed Viehbacher’s management style.

“For 15 people to unanimously take this kind of decision it is not a problem that has to do with personalities, it’s a problem … of cooperation with the board, fundamentally of management style and also of execution,” he told reporters.

Viehbacher transformed a very French drug company by making it much more international in outlook, in large part through the $20 billion acquisition of U.S. biotech and rare diseases company Genzyme in 2011.

Sanofi’s first non-French boss was applauded by analysts and investors for his global approach to running a complex business and for his communication skills.

But he was dubbed the “smiling killer” by trade unionists for cutting jobs in France and questioning the rationale of investing in a country with famously more rigid labor laws than other life science hubs in North America or Asia.

Over the past months, he has also been directly butting heads with some board members, and his position was weakened on Tuesday when Sanofi warned its key diabetes business would probably not grow next year.

Les Echos newspaper this week published a letter from Viehbacher to the board, dated Sept. 4 and revealing his mistrust of Weinberg, chairman since 2010.

“It has come to my attention, first through rumor, that the Chairman of the Board is actively seeking a successor to me as Chief Executive Officer,” read the letter, in which Viehbacher urged the board to clarify his situation as soon as possible.

One source close to the situation said Viehbacher was upset he wasn’t getting any answers and told the board he would be hiring a lawyer. Viehbacher could not immediately be reached for comment on Wednesday.

The fact Viehbacher moved to Boston in June did not help relations, but his change of residence was not the root of the dispute, which chiefly had to do with the way he communicated with the board, sources close to the board said.

“He’s very authoritarian, solitary, secret. He does not sufficiently inform the board of the decisions he’s taking,” one said, prior to Viehbacher’s eviction.

Another person, a former colleague of Viehbacher, said that while his straight-talking, sometimes brusque Anglo-Saxon management style had won over investors, he could be “stubborn and difficult” when working with senior managers.


Earlier this year, Viehbacher reviewed ways to cut Sanofi’s exposure to an $8 billion portfolio of off-patent drugs in Europe, the bulk of which are produced in France.

Viehbacher oversaw the review without informing board members, until the options studied — which concern six sites and would affect 2,600 staff — leaked to the press in June.

In France, a nation whose double-digit unemployment and waning industrial footprint is a growing headache from one government to the next, the move lacked tact and hurt some sensibilities. Weinberg said the review, dubbed “Phoenix”, was a striking example of the CEO’s poor communication with the board.

Viehbacher, however, wanted a free hand to operate and take quick decisions in a complex industry, which is dominated by companies whose executives spend their time shuttling between cites like San Francisco, Boston and Shanghai.

Asked about the fact that investors appreciated Viehbacher and were rattled by his eviction, Weinberg said: “The role of governance is not merely about external communication, it’s about how a company works internally.”

Viehbacher, who had previously emphasized that “everyone in the industry” was looking at what to do with mature drugs, had appeared much more cautious about the topic on Tuesday. He said while various options had been reviewed, “there is no major plan to do anything in France or anywhere else on these products.”

He defended his track record as Sanofi’s boss, noted that the board had recommended to renew his mandate back in May and said he did not understand the sudden change of wind.

“I’ve run the company six years. Most of those board members have been on board for those six years. The board has supported every major decision I’ve taken,” he told Reuters on Tuesday.

(Additional reporting by Ben Hirschler in London and Gwenaelle Barzic and Andrew Callus in Paris; Editing by Susan Thomas and Mark Potter)

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Dow Jones asks court to deny GT Advanced, Apple’s secrecy motion

(Reuters) – Dow Jones Co Inc, publisher of the Wall Street Journal, has asked a court to deny a request by Apple Inc and GT Advanced Technology Inc to keep under seal some documents relating to GT Advanced’s bankruptcy.

Dow Jones, owned by News Corp, said keeping the documents under seal is an offense to constitutional principles of public access, according to the publisher’s court filing on Tuesday.

GT Advanced, which supplied sapphire material to Apple to make smartphone screens, filed for Chapter 11 protection earlier this month and refused to explain why it had imploded, citing confidentiality clauses in its Apple contracts.

Few details have emerged since the bankruptcy filing, which wiped out most of GT’s market value and triggered speculation over what may have soured its relationship with Apple.

Dow Jones said in Tuesday’s filing that the companies’ had not cited any authority to support their “brazen” request and asked the court to reject their “ransom” demands.

Under U.S. bankruptcy laws, there are narrow exceptions which allow documents to be sealed and Dow Jones said neither company had argued that certain documents in the case qualified for this extraordinary protection.

“To the contrary, GTAT has stated unequivocally that the sealed materials do not satisfy the statutory test,” Dow Jones said in the filing.

GT Advanced and Apple were not immediately available for comment.

GT Advanced, which proceeded with its bankruptcy after striking an agreement with Apple, said earlier this week that the iPhone maker had threatened to seek damages of more than $1 billion against the company.

The case is In re: GT Advanced Technologies Inc, U.S. Bankruptcy Court, District of New Hampshire, No: 14-11916.

(Reporting by Tanya Agrawal in Bangalore; Editing by Savio D’Souza)

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Shares rise as investors put faith in Fed’s message

LONDON (Reuters) – World stocks rose on Wednesday, lifted by strong corporate earnings and investor optimism that the U.S. Federal Reserve won’t raise interest rates for some time, even as it is expected to officially wind down its bond-buying stimulus program.

Europe’s main indices followed the overnight lead from Wall Street and Asia, although the third-quarter earnings reports out of Europe weren’t quite as solid as those from the United States.

The dollar was under light selling pressure and major government bond yields were marginally lower, as currency and fixed income markets anticipated a soothing message from the Fed when it ends its two-day policy meeting later in the day.

Germany’s DAX .GDAX was up almost 1 percent in early trade, Britain’s FTSE .FTSE was up half a percent, and France’s CAC 40 .FCHI up a third of one percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 1.1 percent and Japan’s Nikkei share average .N225 climbed 1.5 percent.

“Markets are banking on the prospect that the Federal Reserve will do everything in its power to anchor interest rate expectations at, or below, current levels,” said Michael Hewson, chief strategist at CMC Markets in London.

“Any attempt to alter the (policy statement’s) language in anything other than a dovish fashion could well see markets take fright,” he said.

The Fed is widely expected to announce it will end its two-year-old stimulus program known as quantitative easing three, as the U.S. economy continues to gather momentum. The Fed started buying bonds as far back as late 2008.

Still, Fed officials have also stressed they are in no hurry to take policy tightening a step further by raising rates from near zero levels due to subdued inflation and the poor quality of a recovery in labor markets.

Upbeat U.S. earnings so far have also eased worries that corporate profits might be squeezed by sluggish global growth. With 245 companies in the SP 500 .SPX having reported earnings so far for the third quarter, 73.5 percent have beat analyst expectations, according to Thomson Reuters. Over the past four quarters, 67 percent of companies have beat estimates.

The picture in Europe isn’t quite so rosy. About a third of companies listed on the STOXX Europe 600 .STOXX benchmark index have reported results so far this earnings season, with 67 percent of them meeting or beating profit forecasts, and 59 percent meeting or beating revenue forecasts, according to Thomson Reuters Starmine data.

On Wednesday, Germany’s largest lender Deutsche Bank (DBKGn.DE) announced a third-quarter net loss, and French oil major Total (TOTF.PA) said net adjusted profit fell 2 percent.

In other European corporate news, shares in French pharma group Sanofi (SASY.PA) slumped 5 percent after the company’s board said it had decided to oust chief executive Chris Viehbacher.

In currency trading, the dollar was down 0.2 percent against the Japanese yen at 107.90 yen JPY= and the euro was little changed at $1.2730 EUR=, close to Tuesday’s one-week high of $1.2765.

The yield on benchmark 10-year U.S. Treasury bonds was down a basis point at 2.275 percent US10YT=RR, as was the German Bund yield at 0.87 percent EU10YT=RR.

Italian government borrowing costs fell more steeply, prompting a similar move across peripheral euro zone bond markets, after the European Commission gave a tentative thumbs-up to Rome’s 2015 budget.

Italy, like France, has been campaigning for Brussels to afford it greater fiscal flexibility in order to nurture fragile economic growth, although their original budget proposals had to be tweaked.

Ten-year Italian yields IT10YT=TWEB dropped 4 basis points to 2.51 percent. Spanish equivalents, which tend to trade in lock step with their southern neighbor, also dropped 4 basis points to 2.11 pct ES10YT=TWEB.

(Additional reporting by Marius Zaharia; Editing by Susan Fenton; To read Reuters Global Investing Blog click here; for the MacroScope Blog click on; for Hedge Fund Blog Hub click on

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French drugmaker Sanofi sacks CEO Viehbacher

PARIS (Reuters) – Sanofi’s (SASY.PA) board ousted its chief executive of six years at a special meeting on Wednesday, two days after it emerged he had fallen out with the French drugmaker’s chairman, wiping more billions off its market value.

The management turmoil comes at a particularly awkward time for France’s second-biggest listed company, after it warned on Tuesday that growth in its key diabetes business would likely stall next year.

The board said on Wednesday Sanofi would continue the strategy of international expansion pursued under Chris Viehbacher, blaming his dismissal on his management style and poor relations with the board.

But some analysts fear the company may become more insular.

“Viehbacher tried hard to change the DNA of the company but the board won in the end. Sanofi will become more parochial now,” said Navid Malik, head of life sciences research at Cenkos Securities in London.

Shares in Sanofi were down more than 4 percent in morning trade. That takes their decline over the past three days to more than 15 percent, wiping almost 17 billion euros ($22 billion) from the company’s market value — or more than the entire market capitalization of French carmaker Renault (RENA.PA).

Sanofi said Chairman Serge Weinberg would take on the CEO role until a replacement for the ousted German-Canadian Viehbacher was found. Weinberg said on a conference call there had already been contacts with potential candidates in the pharmaceutical industry and nationality would not be a factor.

“We want to choose the best possible boss for Sanofi, so we’ll take the time that’s needed,” Weinberg said, adding the board would strive to go “as fast as possible”.


Sanofi’s first non-French boss, Viehbacher transformed a national champion into a global business, largely due to the $20 billion acquisition of U.S. biotech and rare diseases company Genzyme in 2011, which tipped the enlarged group’s center of gravity away from Paris and towards Boston.

But his straight-talking and sometimes brusque management style raised the hackles of trade unions, and a source close to the board told Reuters this week that it was unhappy at the lack of communication from an “authoritarian, solitary, secret” CEO.

Viehbacher did not inform the board when he recently oversaw a review of what to do with an $8 billion portfolio of off-patent drugs in Europe, most of which are produced in France. The options studied leaked to the press and fired up tensions.

Weinberg said the unanimous decision from the board’s 15 members to remove Viehbacher stemmed mainly from his management style and poor cooperation. He also cited problems with Viehbacher’s execution of group strategy, pointing to inventory problems in Brazil last year, a slowdown in sales in China and Tuesday’s warning on its diabetes business.

The fact Viehbacher moved to Boston in June did not help relations improve, but his change of residence was not the root of the dispute, one source close to the board said.

Uncertainty over Viehbacher’s role first surfaced on Monday with the publication of a Sept. 4 letter he sent to the board asking for clarity about his position.

A source close to the matter said Wednesday’s board meeting lasted only 30 minutes and was relaxed. “Chris Viehbacher thanked everybody and said he respected the board’s decision. He seemed prepared,” the source said.

French cosmetics group L’Oreal (OREP.PA) is Sanofi’s largest shareholder, with a stake of 9 percent. Officials at the company were not immediately available to comment.


Some investors were disappointed Sanofi did not set out a plan on Tuesday to offset problems at its diabetes unit with cost cuts. However, Citi analyst Peter Verdult said scope for significant cuts were limited by the need to invest in the new drug pipeline. It is also difficult for Sanofi to cut its domestic cost base in France, due to strict French labor laws.

One lever Sanofi could pull would be to make further acquisitions, according to Bernstein analyst Tim Anderson.

“Generally speaking, in the pharmaceutical sector, larger MA deals tend to happen when companies are in difficult straits and this is where Sanofi seems to be at the moment,” he said.

Sanofi has stayed somewhat on the sidelines of a global tide of mergers and acquisitions in the industry over the past year.

Weinberg ruled out mega-deals, saying these rarely created value, but said the group would keep looking at targeted acquisitions to strengthen its existing businesses.

“It’s not because we haven’t acted lately on this front that we won’t do so tomorrow, but we are not interested in big operations, in what we call mega-mergers,” he said.

(1 US dollar = 0.7853 euro)

(Additional reporting by Ben Hirschler in London and Alexandre Boksenbaum-Granier in Paris; Editing by James Regan, Andrew Callus and Mark Potter)

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