Shares of Illumina Inc (ILMN.O) fell 35 percent and dragged down its peers on Friday, a day after the maker of genetic analysis tools forecast a weak third quarter on uncertainty related to research funding in the United States and Europe.

Declining sales in the wake of weakening global markets and a lack of clarity on government funding levels have pushed down the stocks of Illumina and its peers by about a fifth over the past three months.

The life science tool sector saw a softening in academic spending market as early as the second quarter and most of the companies realized that academics right now are in the state of uncertainty, Robert W. Baird & Co analyst Quintin Lai told Reuters.

Companies such as Illumina, Affymetrix Inc (AFFX.O) and Life Technologies (LIFE.O) get 20-40 percent of their revenue from U.S. government-backed research and could be hurt by a budget squeeze.

Illumina shares took the most beating as the company was more at exposure than the others, Lai said.

What was built into the stock price was that Illumina was not going to have any hiccup and that Life Technologies and Affymetrix are going to be suffering the headwinds, Lai said.

Now, when you see results like Illumina's pre-release last night, the stock got hit really big today.

San Diego, California-based Illumina, which currently serves life-sciences research, applied markets and the molecular diagnostics market, said it expects these conditions to continue through at least the fourth quarter and suspended its full-year outlook.

Illumina said it expects to post revenue of about $235 million for the third quarter, compared with Wall Street expectations of $278 million.

Citigroup said while there has been ongoing concern over a weakening environment for the tools sector, the magnitude of Illumina's miss was a surprise and cut its price target on the stock to $32 from $44.

Three other brokerages also cut their price targets on Illumina's stock.

Illumina's shares were at $27.80 in late morning trade on Nasdaq after falling to a nearly two-year low of $25.71. Shares of Bruker BioSciences Corp (BRKR.O) were down 4 percent at $13.15, while those of bigger rival Thermo Fisher Scientific Inc (TMO.N) were down 6 percent at $50.36.

Affymetrix's stock was down 6 percent at $5.35 and Life Technologies shares lost 7 percent of their value to trade at $36.50