**Core Concept**
Thalidomide is a teratogenic drug that was withdrawn from the market due to its severe side effects, particularly its ability to cause birth defects. It works as an immunomodulatory agent by inhibiting the production of tumor necrosis factor-alpha (TNF-alpha) and other cytokines.

**Why the Correct Answer is Right**
Thalidomide's adverse effects are well-documented and include severe peripheral neuropathy, constipation, fatigue, and teratogenicity. The drug's mechanism of action involves the inhibition of ceramide synthesis, which leads to the reduction of TNF-alpha production and subsequent anti-inflammatory effects. However, this also contributes to its teratogenic effects and peripheral neuropathy.

**Why Each Wrong Option is Incorrect**
**Option A:** Thalidomide is also known to cause thrombocytopenia and neutropenia due to its immunomodulatory effects, making this option incorrect.
**Option B:** Thalidomide-induced constipation is a common side effect, which is why this option is incorrect.
**Option C:** This option is incorrect as thalidomide can cause an increase in liver enzymes and may also lead to liver toxicity in some cases.

**Clinical Pearl / High-Yield Fact**
It's essential to remember that thalidomide is a teratogenic drug and should never be prescribed to pregnant women. This includes the use of thalidomide for conditions like multiple myeloma, where alternative treatments should be considered.

**Correct Answer:** D.