'No, no — the smile we're looking for isn't like that.' That's a 'sneer' or a 'mocking laugh'.
Literal
''Wrong wrong, we [topic-は] want-seek smile [topic-は] such-like is-not'' That [topic-は] ''scornful-laugh'' or ''mockery''.
Contrasts different Japanese words for 'laugh' based on quality. 笑い (わらい) is the neutral 'laugh/smile'. 嗤い (わらい, same reading but different kanji) specifically means a sneering, scornful laugh — the 嗤 character is reserved for this negative nuance. 嘲笑 (ちょうしょう) is 'mockery, ridicule'. The sentence is playing on the kanji distinction that's invisible in speech.