Use the Bell of remembrance to get out of the castle to return to Sylva city.
go talk to mandrake again.
Edit: with update 1.0f I can now get it under half health in my first turn. then it retaliates by removing the shield it gave me and one shot the team.
I've been able to get to phase two a few times. In phase two, he re-enables healing, but I'm pretty sure he gains some type of damage reflection because I hit him with a hero strike and immediately lost the battle. He didn't even take a turn where he could have actually attacked, just, "Hey, I saw that you did 22k damage in one hit. Would you like to retry the battle?" I don't think that he's supposed to be beatable.