Without knowing the full details of the case, it's hard to post meaningful comment here.
As you've suggested, it's possible that the CPS might still be trying to work out whether there's sufficient evidence to charge the (alleged) offender with anything at all. However it's equally likely that they're trying to work out
which charge to apply.
As an example, in an assault case, if the police were responsible for providing the CPS with photographs of a victim's injuries, together with medical reports collected from a hospital, but have failed to do so yet, the CPS might be unsure as to whether to charge the (alleged) offender with 'ABH' or 'GBH'.
Similarly, if they're already sure that the injuries sustained by the victim fall into the 'GBH' category, they might need further information from the police in order to decide whether to bring a charge under Section 20 of the Offences Against the Person Act 1861 ('GBH') or under Section 18 of that Act ('GBH with intent'). For example they might need to know whether the police are able to prove that the (alleged) offender deliberately took a billiard cue to the scene of the attack, with the intent of using it as a weapon, or whether he simply grabbed hold of one, initially in order to defend himself, in the bar where the assault took place.
In a fraud case the CPS might need additional evidence in order to decide whether a charge should be brought under Section 2 of the Fraud Act 2006 ('false representation') or under Section 3 of the Act ('failing to disclose information').
If the bail period has reached 4 months though, it indicates that
(a) a senior police office must have authorised the extension of the bail period beyond the normal limit of 28 days ; and that
(b) a Magistrate must have subsequently authorised the extension beyond the 3 month period available to a senior police officer:
https://www.richardnelsonllp.co.uk/28-day-pre-charge-bail-limit/