Step 1: Thalidomide is a glutamic acid derivative with sedative, anti-inflammatory, immunomodulatory and anti-angiogenic actions. The question asks which statement is false.
Step 2: Check option A. Thalidomide was reintroduced as a drug of choice for erythema nodosum leprosum (ENL or type 2 lepra reaction), where it suppresses the raised TNF-alpha. So A is true.
Step 3: Check option B. It was marketed in the late 1950s as a sedative and antiemetic for morning sickness in pregnant women, then withdrawn after it caused phocomelia (seal-like short limbs) in the fetus. So B is true.
Step 4: Check option C. Because of its anti-angiogenic and immunomodulatory action it is now an approved agent for both newly diagnosed and relapsed multiple myeloma, often with dexamethasone. So C is true.
Step 5: Check option D. The main adverse effects of thalidomide are sedation (not euphoria), constipation (not diarrhea), peripheral neuropathy, deep vein thrombosis and severe teratogenicity. Diarrhea and euphoria are not its typical effects, so this statement is false.
Conclusion: The incorrect statement is option D.