It might not be completely cancelled. It could be one of those cases where Watch Dogs died so that (some other game) might live.
Reading that page -
During early development, The Last of Us was initially conceptualized as a more realistic interpretation of the Jak & Daxter universe. As such, Jak was to be a regular human being, and Daxter would function like an ordinary weasel -- most notably lacking the ability to talk. This idea was eventually scrapped, and Naughty Dog quickly settled on creating a new IP instead.
Yep they were really trying to do that.
How was Dead Space related to that though? Never heard of it as anything else.