The scrum-half announced earlier this month that he will leave Edinburgh in the summer, and the Top 14 club appeared to be leading the chase for his signature.
However, Perpignan president Paul Goze has since declined to comment on new signings until his side has secured top-flight survival. They are among six sides battling against relegation.
Of the current squad, 15 are leaving the club, while nine new players are known to have agreed terms, among them Scotland flanker Alasdair Strokosch.
But reports on Friday suggested that club bosses are looking to cut the wage bill by up to 33 per cent and that negotiations with Blair had been terminated.