It's really hard to say without more details as to what the field is, and how likely you are to be able to extend either your method, or the prior author's methods, to yield new results. Maybe you should try contacting the author in question to ask them what they think of your approach.

Another important question is how likely you are to be able to secure funding for one more year to work on your PhD. Since it often takes the better part of one year to learn the basics of a given field of math in order to make a research contribution, this time is not wasted anyway, but you will probably need some kind of extension. This, again, depends on many circumstances: ask other people in your lab / department / école doctorale what they think about it.

To summarize: it's certainly not good, but exactly how bad it is depends on the precise details of your situation.