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.
This is a bug I keep frequently getting, my party members are in my party while at the same time they aren't. then at the Lillithfight, it's just a constant loop of I beat her, I can't progress and when I try to leave it retriggers the event of entering the room and I have to refight her.