The vaccines, GSK's Rotarix and Merck's Rotateq, combat the main cause of diarrhea - the second-largest killer of children under the age of five worldwide.

Because rotavirus-related diarrhea kills more than 500,000 children a year, the World Health Organization (WHO) recommended in 2009 that all countries should include rotavirus vaccines in national immunization programs, but many developing countries struggle to afford them.

The Global Alliance for Vaccines and Immunization (GAVI) said on Tuesday its cut-price deal would allow it "to respond to ever-increasing demand from developing countries" and provide the shots this year for 3 million children in eight poor countries.

By 2016, GAVI said it planned to roll out the vaccines in more than 40 of the world's poorest countries, immunizing more than 70 million children.

Around 95 percent of the contracted supply of 132 million doses will be procured at a cost of $5 per two-dose course, GAVI said in a statement. This is a two-thirds price cut compared to the previous lowest price offered to GAVI of $15 a course.

In the United States, the same vaccine course costs public institutions $177 and private health providers $213.

GAVI is a Geneva-based public-private partnership backed by the Bill & Melinda Gates Foundation, the WHO, the World Bank, UNICEF, international donor governments and others. It funds bulk-buy Immunization campaigns for poorer nations that can't afford vaccines at rich-world prices.

Its chief executive Seth Berkley said the deal showed how GAVI's model was working to the benefit of some of the world's most disadvantaged children.

"We strive to make our donors' funds go further so we can help developing countries protect more children against deadly diseases," he said in a statement.

The WHO says vaccination is one of the most cost-effective public health measures. It estimates that 2 to 3 million deaths are averted each year with Immunization.

GAVI had previously been struggling to get enough donor funding to sustain its programs, but it got a hefty boost last year when international donors led by Britain and the billionaire philanthropist Bill Gates pledged $4.3 billion to support it.

A spokesman for GSK, which will supply 95 percent of the GAVI contracted doses, said the British drug maker was glad to be contributing to efforts against preventable diseases. "Rotavirus vaccine has demonstrated real-world, life-saving impact on reducing deaths," he said. "We have a chance here to collaborate in programs designed to protect millions of children."

(Editing by Helen Massy-Beresford)

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