Inclusion Criteria:

• Subjects must have histologically or cytologically confirmed adenocarcinoma of the breast with locally recurrent or metastatic disease. Locally recurrent disease must not be amenable to any local treatment with curative intent.
• HER2-positive by FISH, CISH, or IHC 3+
• ECOG performance status 0 or 1
• Left ventricular ejection fraction greater than or equal to institutional lower limit of normal
• Adequate laboratory studies (hematological, chemistries and urinalysis)
• Life expectancy greater than or equal to 3 months
• Cohort A only:
• Subjects must be either trastuzumab naïve or have had prior trastuzumab in the neo-adjuvant setting only
• Subjects must not have had a clinically significant drop in cardiac function during a prior exposure to trastuzumab
• Subjects must have had no prior chemotherapy for metastatic or locally recurrent breast cancer
• Subjects must have had no prior lapatinib therapy
• At least 3 weeks from enrollment since prior chemotherapeutic agents, including taxanes, in the neoadjuvant or adjuvant setting
• At least 3 months from enrollment since prior trastuzumab in the neoadjuvant or adjuvant setting
• Cohort B only:
• Subjects must have failed (due to disease progression or toxicity) trastuzumab in the first-line metastatic setting. Trastuzumab must be discontinued for at least 3 weeks prior to enrollment
• Subjects must have received prior chemotherapy as adjuvant therapy or for metastatic disease
• Prior chemotherapy treatment must be discontinued for at least 3 weeks prior to enrollment
• Subjects must have had no prior capecitabine
• Subjects must have had no prior lapatinib

Exclusion Criteria:

• Inflammatory breast cancer
• Current or prior history of central nervous system metastasis
• Clinically significant cardiovascular disease
• Radiation therapy ≤ 14 days prior to enrollment. Subjects must have recovered from all radiation therapy related toxicities.
• Concurrent or prior (within 1 week before enrollment) anticoagulation therapy, excluding aspirin and anti-platelet agents. The concurrent use of low molecular weight heparin or low dose warfarin (ie, less than or equal to 1 mg daily) for prophylaxis against thrombosis is acceptable while on study
• Uncontrolled hypertension defined as diastolic blood pressure > 90 mmHg OR systolic blood pressure > 140 mmHg. The use of anti-hypertensive medications to control hypertension is permitted.
• Subjects with a history of prior malignancy, except:
• Malignancy treated with curative intent and with no known active disease present for greater than or equal to 3 years before enrollment and felt to be at low risk for recurrence by treating physician
• Adequately treated non-melanomatous skin cancer or lentigo maligna without evidence of disease
• Adequately treated cervical carcinoma in situ without evidence of disease
• Subjects with interstitial pulmonary disease
• For Cohort B only:
• Current or prior history of long QT syndrome
• Baseline ECG report of QTc interval of > 480 milliseconds
• Severe chronic liver disease (Child Pugh C)