Battling the Mutant is easy enough, it's just getting through the first few rounds. At the end of each turn, the Mutant will regenerate, healing most, if not all the damage he took during the turn. Fire attacks are his weakness, so have Ryu transform using Flame and Defender then repeatedly strike it with Flame Claw. Momo should equip herself with her Flame Chrysm and attack (having Double Blow can help speed things up). Nina should just use Simoon and possibly use healing items if needed, though Momo's Healing Spells can more than do the job. After a few rounds of this, the Mutant will lose his ability to regenerate, so defeating him becomes extremely easy. Just continue using Flame Claw, Fire Chrysm attacks, and Simoon and the Mutant will go down quickly.