If the deal isn't worth it for you, and you don't have any contractual obligations already, negotiating doesn't mean you have to make a deal. But there are several reasons why someone might make an insultingly low offer, and it may still be possible to come to a mutually beneficial arrangement.

They may simply be trying a hard-ball negotiation strategy, while being able to afford to go a lot higher.

The best thing you can do is to explain that their offer is worse than nothing for you and there is no way you can go ahead with it (but don't tell them your break-even point), and collect more information about their situation - understand why they want to do business with you, try to understand it from their point of view: how much revenue can they make from what you have, and what their costs and revenues for substitute options. If they won't get as much revenue from the deal as what your costs will be, then it is not possible for you both to make a profit and you can part amicably without doing a deal.

If they would bring in a lot of revenue because of the deal compared to their next best option, you can offer them a price which splits the profit for mutual benefit.

Collecting the information needed to see it from their point of view is hard and takes tact, but it is the most important part of negotiating.