While such an event is an obvious chance for you to ask the player "so... what is your character concept plan B?" if they are deeply invested in being Odaylan, I would interpret the result as meaning that The Bear now Lives within him - he still gets nifty bear powers, but has a difficult time controlling them.
Give him a flaw like "More Bear than Man" or "Brother of Bears" and carry on with the initiation. The player keeps the character concept they want, and as Narrator you get a whole slew of interesting plot hooks where the Heroes have to deal with the fact that one of their number is effectively a were-bear :-)
Remember that failure isn't about punishing the player - but about creating an interesting story.
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