it may be Lymphocystis, a viral disorder which infects cells and causes them to become megaloblastic, i.e larger than normal.
this disease used to be considered untreatable as most viral infections. recent research however, has shown that neutral Acriflavine may be effective in treating this disease. "Aquarium Products" makes a product called "Lymphocystis Cure" which contains Acriflavine as it's active ingredient. if you cannot get this product, try and find neutral Acriflavine in raw form. failing that, try and find a product containing it ... (Jungles Ich Guard for example). the latter may or may not work due to the relatively lower dose of Acriflavine it contains, but it's worth a try.
treating in a well aerated hospital tank - Bathe the fish 3-5 hours in iso-thermic iso-pH water according to label instructions for the Aquarium Products and replace the fish in its main tank. Re-bathe again in five days when you will already be seeing a reduction in lesion mass. Regrowth has not been seen after complete clearance.
note, Acriflavine will not work on other granulomata or cancers. note too, that as a virus, Lymphocystis is rarely fatal and may run it's own course and disappear on its own.
http://www.koivet.com/images/ly-cured.jpg
the area around the mouth doesn't look normal either, based on your picture. have you checked your ammonia, nitrite and nitrate? what size tank is this fish in. how many and what type other fish are in there with him and are 'any' other fish affected?
