I think your playing one of those event mission. If you knock out the guy with the gun, that battle is automatically over.
You should load up on several attack +100 items for your melee characters. You can get this by converting a hammer or long sword. The most common method to beat any boss is to have one tank in front line and take the majority of attacks. If he dies, it's ok, you can revive him. I found most of boss battles on hard mode I die or near die with one combo. You can even use that to your advantage by intentional hurting your characters to activate less 25% hp will power.
I remember in that battle I beat that stage in two turns. First turn, move as little as possible and link your characters and stand there. Revive or heal your fallen comrades. On second turn, AI will try to hurt you and shift their units towards you. You should unleash all your combos or attacks. You will eventually break their defense and beat them.
If you really have a hard time, you can try failure fusion. Every time you fuse an item there is a slight chance a fusion will fail and you will net a random item. I seen people got some really good items. You should fuse item that common and cost effective such as Long sword= Iron Sword + Horn of Devilkin. If you don't care about netting true path ending for first play through you can get Horn of Devilkin in Generation 1 - North Elralmalt Trail and iron sword is already available at your local shop. Stock up on several of these items then save your game. Now fuse your items and hope you get a failed fusion. If you didn't get a fail item or your desire item, just load your save.