Sir Christopher Evans, the biotech entrepreneur, will not be prosecuted by the Serious Fraud Office (SFO) over allegations relating to his business, Merlin Biosciences.

The SFO said yesterday that it had dropped its four-year investigation into Sir Christopher after extensive inquiries.

The move will close the door on a difficult time for the businessman. Sir Christopher was also caught up in the cash-for-honours scandal two years ago after he loaned £1 million to the Labour Party. He was not charged and the money has been repaid.

One of the most high-profile figures in the biotech world, Sir Christopher is a self-made millionaire and the founder of Merlin Biosciences.

The SFO investigation centred on allegations from a former employee, Andrew Greene, a former Merrill Lynch banker, that there was fraud relating to the third investment fund Merlin raised in 2003.

Sir Christopher has always denied the allegations. Yesterday he said: “I am delighted that the Serious Fraud Office has finally accepted what I and my colleagues have been telling them from the outset. There was no wrongdoing. We knew that and just as importantly our investors knew that. Now we have been completely vindicated.”

The SFO traced the complex financial arrangements associated with Merlin over the past four years, tracking money between Luxembourg, Switzerland and Guernsey. Of particular interest was a Guernsey-based trust.

The SFO interviewed five people as suspects and about 40 people as witnesses. No one was arrested.

Glyn Powell, who led the investigation for the SFO, said he had dropped the case after concluding there was “insufficient evidence to provide a realistic prospect of conviction”.

As one of the most high-profile investigations of an individual the SFO has undertaken, the collapse of the case against Sir Christopher will be a blow for the organisation.

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