The spell isn't supposed to do anything. However, if you want to make it work, you can go into CoreSpells.XML (found in C:\Program Files (x86)\Steam\SteamApps\common\FE Legendary Heroes\data\English if you installed in the default directory), locate the spell 'VatulasDragonslayer', and change this:

to this:

Note that with the way this is set up, there is no chance for the target creature (which must be of creature-type 'dragon', if you look at the parts of the XML for Vatula's Dragonslayer which I am not telling you to change) to resist the spell. Thus, with this change Vatula's Dragonslayer becomes a guaranteed instant-kill spell. If you don't want that, I suggest finding a spell such as 'Kill' or 'FlameDart' to see how to handle partially-negates resists of the spell, or find a spell like 'Blind' or 'Wither' to see how to handle fully-negates resists of spells.