Announced last year, not much was known about the project, other than it was a RPG planned for the PlayStation 4 console. Things started to look uncertain when Baba left earlier this year, and it seems that the project will likely not move forward.
Update: According to a report from USgamer, Square Enix has closed Studio Istolia and cancelled Project Prelude Rune. They provided the following statement:
“Following evaluation of various aspects of Project Prelude Rune, development of the title has been canceled. Studio Istolia is no longer in operation and we have been taking appropriate steps to assign studio staff to other projects within the Square Enix Group.”