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The Liche Potion is a formula invented by Mordra to destroy the Liche in Horance. It is a mixture of one red cure potion, one black invisibility potion and one potion of Mandrake Essence. It only works with Horance in a Soul Cage.
Mordra invented the mixture to destroy the Liche, but thanks to the stupidity of Mayor Forsythe, the wrong proportions were given to Caine, with a ton of Mandrake Essence causing an explosion that burned down the whole city. In Ultima VII, the Avatar made sure to use the right proportions, mixing the potion in Caine's lab. Using it together with the Soul Cage on Horance, the Liche in him was destroyed.