Inclusion Criteria

DISEASE CHARACTERISTICS:

- Histologically confirmed invasive breast cancer meeting the following criteria:

- Phase I

- Locally advanced or inflammatory disease, or specified subgroup of large
operable disease for whom neoadjuvant chemotherapy is appropriate, defined
as any 1 of the following:

- Clinical stage T4a-d, any N (inflammatory breast carcinoma: tumor
mass, breast enlargement, oedema and warmth of the skin are often
present but not mandatory for the diagnosis)

- Any clinical T, N2 or N3 (ipsilateral supraclavicular nodes)

- cT3cN0,1 any estrogen receptor (ER)

- cT2cN1 any ER

- cT2cN0 ER negative

- Presence of bilateral breast cancer is allowed

- No bone, liver, or other extensive metastases

- Minimal lung, skin, or nodal metastases may be allowed at the
discretion of the investigator (phase I only)

- Phase II

- Locally advanced or inflammatory breast cancer, defined as any 1 of the
following:

- Clinical T4a-d, any N (inflammatory breast carcinoma: tumor mass,
breast enlargement, oedema and warmth of the skin are often present
but not mandatory for the diagnosis)

- Any clinical T, N2 or N3 (ipsilateral supraclavicular nodes)

- And M0

- Bilateral breast cancer is allowed provided only 1 side is HER2-positive

- Any large resectable T2 or T3 breast cancers, M0

- HER2-positive disease by immunohistochemistry, fluorescent in situ hybridization,
and/or chromogenic in situ hybridization

- No CNS involvement

- Two frozen trucuts for every core biopsy indicated by the translational research
study

- Hormone receptor status:

- Estrogen receptor- and/or progesterone receptor-positive or negative tumor

PATIENT CHARACTERISTICS:

- Female

- WHO performance status 0-2

- Hemoglobin > 10.0 g/dL

- Absolute neutrophil count > 1,500/mm^3

- Platelet count > 100,000/mm^3

- Bilirubin < 1.5 times upper limit of normal (ULN)

- AST and ALT < 3 times ULN

- Creatinine < 1.5 times ULN

- No other malignancies within the past 3 years except basal cell or squamous cell
carcinoma of the skin or carcinoma in situ of the cervix (phase II)

- LVEF normal by MUGA or ECHO

- ECG normal

- Not pregnant or nursing

- Negative pregnancy test

- Fertile patients must use effective contraception 2 weeks prior to, during, and for 1
month after completion of study treatment

- No current active hepatic or biliary disease (with exception of patients with
Gilbert's syndrome, asymptomatic gallstones, or stable chronic liver disease not
requiring therapy as per investigator assessment)

- No serious cardiac illness or medical condition within the past 6 months including,
but not limited to, any of the following:

- History of documented congestive heart failure

- High-risk uncontrolled arrhythmias

- Angina pectoris requiring antianginal medication

- Clinically significant valvular heart disease

- Evidence of transmural infarction on ECG

- Poorly controlled hypertension, defined as systolic blood pressure (BP) > 180 mm
Hg or diastolic BP > 100 mm Hg

- Able to swallow and retain oral medication

- Accessible for repeat dosing and follow up

- No concurrent grapefruit juice

- No active or uncontrolled infection

- No other serious illness

- No malabsorption syndrome

- No other medical condition (i.e., history of chronic alcohol abuse, hepatitis, HIV,
and/or cirrhosis)

- No psychological, familial, sociological, or geographical condition that would
preclude study participation

PRIOR CONCURRENT THERAPY:

- No prior therapy for any cancer, including chemotherapy, radiotherapy, or hormonal
therapy for breast cancer (phase I)

- No prior epidermal growth factor receptor- or HER2-targeted therapy or antibody
therapy (phase I)

- More than 10 days since prior and no concurrent CYP3A4 inducers or inhibitors

- More than 14 days since prior and no concurrent herbal infusions or dietary
supplements

- No antacids 1 hour before or after lapatinib ditosylate administration

- No other concurrent investigational therapy or anticancer therapy

- No concurrent prophylactic antibiotics